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As expected the employment report for November was bad having shed 533,000 jobs with unemployment advancing to 6.7%.
WASHINGTON (MarketWatch) - U.S. nonfarm payrolls plunged by an astonishing 533,000 in November, the worst job loss in 34 years, the Labor Department reported Friday.
It's only the fourth time in the past 58 years that payrolls have fallen by more than 500,000 in a month. Since the recession began 11 months ago, a total of 1.9 million jobs have been lost.
But it would have been worse had it not been for the mysterious positive addition of 30,000 jobs by the so-called birth-death model. From here on out we'll just refer to it as the birth-birth model because no matter how bad the underlying economic data this model somehow always adds jobs in every month except typically January and July when the model backs out a few of its more irrationally exuberant additions.
However, keeping regular track of the amount of fudging in the Birth-Death model is one of my favorite activities because I think it provides insight into just how unreliable government statistical models really are. For a nation that drives economic policy "by the numbers" it's important that the numbers are good. The Birth-Death model provides a valuable caution flag for anyone with a tendency to "believe the numbers" that are being offered up for consumption.
I found it odd that the birth-death model determined that construction jobs were neither gained nor lost across the Oct-Nov time frame as we saw record-breaking slowdowns in both construction spending and project starts during those months. One wonders what sorts of model inputs they are using at the BLS?
Even odder would be the 5,000 jobs added to the financial activities sector. Based on this alone, we can be sure that this model does not use any sort of inputs from the real world.
And if we look a bit deeper into the jobs report we find more troubling trends with 1 in 8 people either out of work or forced to work part-time:
An alternative gauge of unemployment - which includes discouraged workers and those whose hours have been cut back to part-time - rose to 12.5% from 11.8%.
The 'alternative measure' mentioned above is much closer to how Europe reports unemployment, as it includes the so-called "discouraged workers," who would work but can't find anything worth doing and have given up looking.
Definition:
Marginally attached workers are persons who are currently neither working nor looking for work, but who indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.
Lastly, there is employment, but there is also under-employment. One measure of that is the number of people who are counting as "working," but who have part-time jobs when they would have preferred a full-time job. That measure has been trending upwards for quite a while and now totals more than 7.3 million people.
The number of workers forced to work part-time rose by 621,000 to 7.3 million.
The job losses are just beginning and will not peak for some time. The hope is that this cycle of losses will be over by early spring.
"It is blindingly obvious that the U.S. labor market is in a terrible state and is deteriorating rapidly," wrote Ian Shepherdson, chief domestic economist for High Frequency Economics. He expects the job losses "to accelerate over the next few months, peaking - hopefully - in the early spring."
The rate of decline may taper off in the spring, but the losses will probably continue throughout the year. "The eventual peak [in unemployment] will be close to 9%," Shepherdson said.
My own thought is that this cycle is not going to play out like past cycles and that job losses will not subside for another 12-18 months. My reasoning? The US economy is an 80% service economy and those jobs are sensitively dependent on an expanding economy.
Since our economy has not yet displayed any signs of responding to the trillions and trillions thrown at the banks I consider it very likely that the bottom is still out in front of us somewhere and that job losses will continue to mount until 3-6 months after that bottom is made.
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I agree with Chis' view here. There can be many ways to change statistical data. The most important point of this blog was concerning how large services make up the economy. If people aren't willing to spend there money, the economic numbers will continue to contract. The process feeds on itself. More people loose their job; therefore, less are willing or able to spend, bringing the result that more consumer related companies will cut employment.
The scariest part of this situation is the enormous printing of money the government is currently doing to stave off the crisis. These funds are jammed up in the system right now. Once the get unclogged, massive inflation could be the result.
Chris,
Given there are so many extraordinary disconnects between the "information" that the "government" provides and the reality that is so painfully apparent to anyone with a brain cell and a pulse:
1) why has nobody come forward from one of the fuzzy number crunching crews and exposed what's going on?;
2) who exactly is "The Wizard," and where did he/she/they acquire a gall (as in "some gall...") of that size?
The models: I know people (non-thinking) often trust the tools/models they have, simply reporting whatever the guage or screen tells them; as you or any other sensible person who has a science/math background know, there are those students who punch the numbers into their calculators for, say, a simple volume calculation of a cube that will fit on the average desk, they get a number that represents the volume of the nearest dozen galaxies, they write the number down and proceed to the next problem...
Is that what we've got here? Fuzzy-number bots? People who haven't the common sense of zuccini?
And if that is the case, someone made the tools and models that are given to the bots to use; those people must at least question the models they've developed? No? Unless there truly is a curtain behind which they are sitting and purposefully manipulating The Show...
I am having a hard time reconciling the utter absurdity of the government's numbers with the conspiracy it would require to cover up such an enourmously brazen deception of a nation of people--among which there are one or two who should be challenging these things in court.
What exactly is this thing we have been calling the U.S. of A? I am beginning to think like people I used to call crazy! WTF is going on here?
Nonzeroone: I'm with you on this.
My own thoughts are that understanding the numbers takes a small bit of work or at least psychological strength to face the realtiy. Our population is weakened by its binge on entertainment and consumption. The mainstream media doesn't help this at all.
It takes both intelligence and inner strength to admit we've got some big problems. It takes the same to admit our government has been dishonest with us.
Eventually, the masses will wake from their slumber, I only hope that it is not then too late.
Mike
-formerly StudentOfJefferson, reporting live from the Washington D.C. Metro Area
jobs are one thing but what about the small business owners who are closing up shop?.
are there any stats on those numbers?. i know many in construction who are self employed and are not eligible for unemployment and can not find work. where do they fall?
this is not to mention the vast numbers of immigrants who have gone home because there is no work,
Joe2Baba:
I couldn't agree with you more!
We are getting clobbered now. Our residential work has shot up, even folks unemployed are paying and using us. Businesses are unable to pay us becuase they aren't getting paid. For the first time in 10 years she has had to turn stuff over to collections.
I truly feel that the USA is Enron. http://www.videosift.com/video/Enron-The-Smartest-Guys-in-the-Room
Our books are so cooked, I'm not even sure economists or politicans or govt. officials or wall street get this. To me, Ken Lay, Fastow, Scilling - all saying everything is good, buy, buy, buy - are just faces. The faces we see now are just different, Paulson, Bernanke etc.
The deck of cards is coming down. We will wake up as broke as the poor b@st@rds who worked and invested their life savings in Enron. I'm glad these guys (statiticians) don't have A&P (Airframe and Powerplant mechanic) liscenses for if they did the guages in the cockpit would all be in the green as the engines melted off the wings with two bumbling idots in the cockpit too suicidal or too stupid to know better.
It's not a "enormous conspiracy" in the traditional way people tend to think of such things with secret agreements to silence and all that.
Rather, it's as Kevin Phillips describes (somewhat brilliantly) in this Harper's article (which is in my Essential Articles section - everyone should read it). How can our official numbers be so bad and how did they get that way?
My own thought is that this cycle is not going to play out like past cycles and that job losses will not subside for another 12-18 months. My reasoning? The US economy is an 80% service economy and those jobs are sensitively dependent on an expanding economy.
Since our economy has not yet displayed any signs of responding to the trillions and trillions thrown at the banks I consider it very likely that the bottom is still out in front of us somewhere and that job losses will continue to mount until 3-6 months after that bottom is made.
Some thoughts and questions here.
Why would job losses subside in 12-18 months? Does subside mean stop hemorrhaging (reduced to a very small amount or perhaps flat) or does subside mean the restoration of growth, even at a minuscule rate? What would be the reasons for job growth -- and, therefore, most likely GDP or some other statistical growth as well -- in an economy that is on the trajectory that ours and the world's is currently on?
I hate to say this, but of course the bottom is out in front of us somewhere. I mean, if it weren't, what's the point of this very website? Well, to answer a rhetorical question, the purpose of this website is to alert people to what one man feels could be a significant and perhaps even disastrous change in the lifestyle and social conditions of the US and much of the world because of an overwhelming and compelling data set.
Also, when speaking of bottoms we should always say of what. The bottom of lost jobs, the bottom of the Dow, the bottom of the housing market, the bottom of foreclosures, etc.
In 12-18 months (mid-2010) we may well be experiencing the first food and fuel shortages, as the delayed reaction of the volatility of oil prices continues to ripple through the system. More ARMs are scheduled for reset in the 2010-11 than I believe have already reset. And as the housing market heads towards its nadir, perhaps sometime in the 2012-14 window, we're only headed for more foreclosures, more "underwater" mortgages, more abandoned and subsequently vandalized homes, more abandoned developments, more abandoned strip malls because of the abandoned developments. I'm not being negative here but simply following the mathematical trendlines.
Doesn't it seem like the global juggernaut has a lot more bottoming out to do before we reach something that vaguely could be called equilibrium, a place and a manner that could be sustained for decades?
Couldn't the absolute bottom (to maybe coin a new term) -- a place where everything has worked itself out, redundancies eliminated, sustainable practices attempted and sussed out, new financial infrastructures put into place, governmental structures rearranged along more regional and local lines -- be something like 20 years out?
Here is an article that is apropos of this conversation:
http://www.commodityonline.com/news/Revolution-food-riots-in-America-by-2012-13062-3-1.html
One might be inclined to dismiss it as the ravings of a lunatic, but this particular lunatic has an excellent prediction track record. At any rate, it's worth familiarizing ourselves with the worst case scenario. Better to be over prepared than underprepared, I think.
Arthur
How about the bottom of Capitalism...
Peace on Terra http://damnthematrix.wordpress.com/ http://www.greenhousedesign.green.net.au