To hear the media report it, yesterday’s jobs report was great news, with the economy adding 195,000 non-farm jobs. Unemployment, as measured by U3 (the government’s most narrowly defined measure of unemployment) held steady as growth in the employment level was more than matched by those pesky, once-vanished workers suddenly reappearing in the labor force. However, the broader measure of unemployment – U6, which includes discouraged workers and those forced into part-time jobs while needing full time jobs – rose by 0.5% to 14.3% – the biggest jump since January, 2009 during the depth of the recession.
And that wasn’t all of the bad news in the report. Here’s a few more excerpts:
… the civilian labor force participation rate, at 63.5 percent, and the employment-population ratio, at 58.7 percent, changed little in June. Over the year, the labor force participation rate is down by 0.3 percentage point.
… The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 322,000 to 8.2 million in June. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
… In June, 2.6 million persons were marginally attached to the labor force, essentially unchanged from a year earlier.
… Among the marginally attached, there were 1.0 million discouraged workers in June, an increase of 206,000 from a year earlier.
… Employment in most other major industries, including mining and logging, construction, manufacturing, and transportation and warehousing, showed little change in June.
Regarding that second item – the growth in part-time jobs of 322,000 – that means that not only were the 195,000 jobs that were added to the economy disproportionately part-time jobs, approximately another 125,000 full-time jobs changed to part-time. This is corroborated by the fact that there was no gain in manufacturing or construction or other jobs that tend to be higher wage jobs. “Leisure and hospitality” – wait staff, burger flippers and bus boys – accounted for 55,000 of those 195,000 jobs.
Read the report in its entirety and a completely different picture emerges from the one portrayed by the headline numbers. This is an economy that’s flat at best, and likely getting worse.
And, to hear the media report it, the “great news” on the jobs front was celebrated on Wall Street, with stocks rising another 1.0%, again knocking on the door of their all-time highs. Much of the improvement in consumer sentiment has been fed by bullish news about the stock market. Little notice has been taken of the fact that, while the stock market has been up a bit, there’s been an absolute blood bath in the bond market. Anyone with anything close to a balanced portfolio – an equal mix of stocks and bonds – has taken a beating over the past few months. What will happen to consumer sentiment when the majority of investors who don’t keep a keen eye on what’s been happening in both markets open their 2nd quarter statements? (Not to mention the horrible start to the 3rd quarter that we’ve just witnessed.) How much “legs” will this economy have then?
It’s no surprise that this jobs picture isn’t really improving when the president has done nothing to correct trade imbalances (in fact, making matters worse with terrible trade deals like the one with South Korea), while throwing fuel on the fire by flooding the labor market with immigrants workers. The stage is being set for the next recession.