This morning we got news that 162,000 jobs were created in July in the U.S. economy-the worst showing in the past four months. (Source: Bureau of Labor Statistics, August 2, 2013.)
And when we look closely at the July U.S. jobs market report, it gets worse.
First off, the previous months’ numbers keep getting revised downward; the number of jobs added to the U.S. economy in May was revised down from 195,000 to 176,000, and June’s numbers were revised down from 195,000 to 188,000-combined, that’s 26,000 jobs that never really happened.
The underemployment rate, a statistic I consider to be a better measure of jobs market conditions, remained staggeringly high at 14% for the month of July. The big blow: it was higher than what it was during the months of March, April, and May, and only slightly lower than June. The underemployment rate takes into account people who have given up looking for work and part-time workers who can’t get full-time work.
There are close to one million discouraged workers in the U.S. jobs market, and the number of individuals working part-time because they are unable to find full-time jobs remained unchanged at 8.2 million in July.
Of course, one must ask: where are we seeing growth in the jobs market? If you guessed low-wage-paying sectors, then you are right. In July, a combined 85,000 jobs were added in the retail, trade, leisure, and hospitality sectors-more specifically, in food services and drinking places. This is 52% of all the jobs created during the month!
Employment in industries like construction, transportation and warehousing, mining and logging, and government sectors were essentially unchanged. Employment in manufacturing remains dismal, and over the past year, it has remained unchanged as well.
And the labor force participation in the U.S. economy presents an even bleaker view of the jobs market. A record amount of individuals are leaving the jobs market. The labor force participation rate in July stood at 63.4% – a historically low level. (The labor force participation rate is simply the percentage of working-age individuals taking part in the jobs market.)
When I look at jobs market conditions in the U.S. economy, I can’t help but question the theme of economic growth that’s driving key stock indices higher. It all smells fishy to me, as I continue to believe there is no economic growth in the U.S. economy.
What July’s jobs market report did provide was another excuse for the Federal Reserve to continue creating more paper money with no added value to the U.S. economy.
Michael’s Personal Notes:
While I continue to hear politicians and the mainstream media tell me the U.S. economy is in a full-fledged recovery, I totally disagree with the notion.
I believe the truth of what’s going on with the U.S. economy is the total opposite of what we are being fed by both politicians and the mainstream media.
Look at the chart below of the change in the real U.S. gross domestic product (GDP) since the fourth quarter of 2011.
If we were witnessing recovery, or a period of economic growth, would we be seeing the GDP collapsing? The rate of change in the GDP has actually been declining since the first quarter of 2012. This by no means should be taken lightly, as it indicates a recession may be following because economic activity isn’t flourishing.
In fact, I see even more indicators favoring a recession ahead.
Consumers in the U.S. economy are struggling-their pockets are getting emptier. Jobs are being created in the low-paying retail and service sectors. Meanwhile, prices for goods are increasing. Thanks to higher oil prices, I suspect prices for goods will continue to see an uptick.
Dear reader, current estimates of GDP growth are too optimistic-but this will change. Consider this: The Federal Reserve expects U.S. GDP to grow 2.3%-2.6% this year. Currently, in the second quarter, we are only running at an annual GDP growth rate of 1.7%. This is 26% below the Federal Reserve’s lower estimates. Will our economic activity jump by 26% for the balance of this year? I highly doubt it.
This all brings me to one conclusion: the effects of the money printing can only go so far. Eventually, its utility diminishes. I am not surprised to see the signs of a recession emerging while politicians and the mainstream sing a different tune.
The National Bureau of Economic Research defines “recession” as a period in which “a significant decline in economic activity spreads across the economy and can last from a few months to more than a year.” (Source: National Bureau of Economic Research web site, last accessed July 31, 2013.) Aren’t we experiencing this right now?