The payroll data this morning were pretty good given the job losses came in nearly 200,000 less than expected. But further digging suggests the number is not nearly as bullish when parsing the data. Below are a few data points.
ESTABLISHMENT SURVEY
- BULLISH: The headline jobs number of a 345,000 loss comes from the establishment survey and is seasonally adjusted. The unadjusted numbers were even more bullish, showing an increase of 319,000 jobs.
- BEARISH: The Business Birth-Death Model added 220,000 jobs to the headline seasonally-adjusted number. Without this number, we are looking at a loss of 565,000 jobs.
- BEARISH: The number of jobs lost in the last 12 months increased from 5.34 million in April to 5.51 million in May.
HOUSEHOLD SURVEY
- BULLISH: Looking at the reported numbers (which are seasonally-adjusted), the number of unemployed persons increased less in the last 12 months in May (5.98 million) compared to April (6.05 million). This is the first such decline since April 2008. The same decline also occurred on an unadjusted basis for the first time since April 2008
- BEARISH: The number of persons employed decreased last month after popping up in April (Feb – 141.7 million; Mar – 140.9 million; Apr – 141.0 million; May 140.6 million). The same trend from February to May was also evident in the unadjusted numbers.
- BEARISH: While the number of workers currently not in labor force who want a job decreased from 5.94 million to 5.86 million, this was only because of seasonal adjustments. In reality, the increase was sharp: 5.89 million to 6.61 million.
- BEARISH: Other indicators suggest that the shadow supply of discouraged workers not counted in the numbers will now return to the labor force, pushing up the unemployment number. For example, the U-6 unemployment number was a gargantuan 16.4 %, the highest ever.
- BULLISH: The unemployment rate 2nd derivative turned up for the first time this cycle. The unemployment rate is 3.8% higher than it was 12 months ago. In April that number was 3.9%. Generally, a change in the 2nd derivative occurs either before or just as recession is ending. Since this data set goes back to 1929, I would consider this the most bullish statistic of the lot (see my post “Chart of the day: unemployment as a recession indicator").
HOURLY EARNINGS
- BEARISH: The nominal increase in hourly earnings is slowing. It is now only 3.0% over the last 12 months. In April, this figure was 3.2%. Last May, it was 3.8%.
- BEARISH: The number of hours worked per week hit record lows of a seasonally-adjusted 33.1 hours and an unadjusted 33.0 hours.
My conclusion from the data is that we are still in that limbo period waiting for clear signals that a definitive improvement in the labor market has occurred. For the time being, the employment picture in the U.S. remains weak. However, it does not seem to be deteriorating. The most bullish signal is the peak in the change in the unemployment rate which has signalled an end to recession in recessions since 1929.
Also see last post on Credit Writedowns