December 10th, 2012
Lee Adler, Wall Street Examiner
The report is excerpted from the permanent Employment Charts page, which also includes additional charts and discussion, and updated data and charts on Initial Unemployment Claims, Average Hourly and Weekly Earnings, and Hours Worked.
The BLS today reported a gain of 146,000 in nonfarm payrolls. That compares with a gain of 367,000 in the actual, not seasonally adjusted number. In the actual (NSA) data, November is always an up month. Last year the November NSA gain was 302,000. In 2010, it was just 312,000. The 10 year average gain for November for 2002 to 2011 was 175,000. This was a good report, better than trend.
There’s a problem with the seasonally adjusted (fictional) number. The SA number for this month will subsequently be revised for the current month in each of the next 5 years as the BLS attempts to fit the SA number to the actual change. It will also have a major benchmark revision in February, when the benchmarking process is finalized. The truth is that the current SA number is a wild guess and a fraud. The BLS statisticians know it and have publicized that fact, but the mainstream media has ignored the warnings for years.
The actual NSA data is much closer to reality.
The numbers above come from the BLS the Current Employment Statistics Survey or CES, a survey of business establishments. The BLS also does a survey of households. To further complicate matters, the household survey or CPS — Current Population Survey– often tells a different story from the establishment survey.
Unlike with the CES, in the CPS November is a month in which the actual NSA number sometimes increases and sometimes decreases. This year the number of persons reported as employed in November fell by 490,000 from October. That compares with a gain of 83,000 in November 2011 and a decline of 334,000 in 2010. The average change in November for the previous 10 years was a decline of 190,000. By these standards this was not a good month.
The year over year gain was 2.48 million or 1.8%. Over the past 12 months the annual rate of change has fluctuated between 1.1% and 2.2% and since January the rate of gain has been between 1.7% and 2.2%.
I like to focus on full time rather than total employment. Part time jobs are nice, and for many that hold them, they are a lifeline, but the important metric here is full time jobs. Without those, we’re dead.
November is always a down month for full time jobs as surveyed and estimated in the CPS. Last year full time jobs fell by 318,000 in November, and in 2010 they dropped by 994,000. The 10 year average decline in full time jobs for November was 632,000. This year full time employment in the CPS fell by 530,000 in November. This year’s performance wasn’t as good as last year, but it was significantly better than 2010 and slightly better than average.
The chart above gives some perspective on how far total employment and full time employment fell in the first stage of the depression, and how much they have yet to recover. The BLS applied big upward revisions to the seasonally adjusted (SA) fiction for July through September bringing it closer to the trend. Any deviation should be corrected to some degree in February when the annual benchmark revisions are applied, but the SA line will not fully conform to the trend for another 5 years. Note that prior to 2007 on this chart, the SA lines perfectly reflect the center of the trend. That’s because all the revisions have been finalized for those years. This year’s line is still constantly shifting in response to new data and subsequent revisions. The SA line for this year will not be final until 2017.
June or July is usually the peak month for both total and full time employment. This year the numbers broke last July’s level in April. The economy was a couple months ahead of schedule in affirming the uptrend in jobs. That uptrend is still firmly entrenched. The gains accelerated in 2012 versus 2011, but throughout 2012 the rate of gain has stabilized around a 2% annual rate. With QE3, the Fed is now adding more fuel to an engine that was running smoothly. No doubt, it will now overheat, especially if, as rumored, the Fed adds even more QE at the December meeting.
Stock market performance is at the mercy of the Fed (0r over the past 12 months the ECB, not shown), and employment typically reflects them both. While at times there’s a lag, the linkage is undeniable. Over the past year, the SOMA has not reflected the impact of the Fed’s MBS purchases from the Primary Dealers, a subject which I cover in depth weekly in the Fed Reports. The graph of Fed purchases from the Primary Dealers has been rising steadily since last September. By cashing out the dealers via these MBS buys, the Fed enables the dealers to buy more Treasuries. The next week, the Treasury spends that cash. That’s how Treasury debt is immediately transformed into economic activity and slow and steady job creation.
With QE3, the Fed is adding even more cash to power that trend. The first settlements of the new MBS purchases begun in September took place in the week of November 14-20. Too little time has transpired for the effects of that to start to be seen. The next round of cash settlements take place from December 12-20. That could show up in the December data, with a bigger impact in January.
This is activity that is sustained only by increasing government debt, and only as long as the Treasury Ponzi remains intact. But it does remain intact, and it’s resulting in steady gains in employment, including full time employment over the past year. The game should continue until the Fed picks up the marbles or until the other players run out of chips. That’s unlike as long as some players are running away from the European casino to play in the US market, while either the Fed or ECB continues to pump liquidity into the system.
The chart below shows that while the number of jobs is growing, the employment to population ratio has barely gained since the recovery began in 2009. The economy seems only to be keeping pace with population growth. Top line growth may satisfy the markets, but it is doing next to nothing to help the massive army of people who have been and continue to be unemployed. Their numbers are growing right along with the number of people who do have jobs. It is a sad state of affairs for the US, but markets don’t care about that.
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