July 8, 2010
As we navigate our current economic malaise it is important to recognize the state of the labor market in the United States. According to the newest data out of the Bureau of Labor Statistics (BLS) we lost 125,000 jobs in June, though some losses were expected due to Census worker layoffs. According to the data, however, we created 83,000 private sector jobs which seems like a step in the right direction. As with all statistics, numbers can be misleading and government data always gets revised.
So as we look at May's private sector payrolls the numbers were revised down from 41,000 jobs created to 33,000, and when we combine the two months we have an unimpressive 116,000 jobs for the period. We need somewhere between 100,000 and 125,000 new jobs per month just to keep pace with population growth.
Take the last two months. Using the birth/death (B/D) model, the BLS assumes that 362,000 jobs were created somewhere. That's three times the number of jobs in the headlines we read. Those extra jobs were added into the total because that's what the model told them to do. And over a complete business cycle, those numbers will average out to be pretty close to right. But as I said, they can also be misleading in the short term. The B/D adjustments say that we added 65,000 construction jobs in the last two months, more than half the total number of jobs created. Really? US single-family homes set an all-time low sales number last week. Mortgage applications are way down. Home construction is off. Commercial real estate construction is down. Where are those construction jobs?
Much of this data has been interpreted to mean things are getting better here in the US labor market. I would submit that things are getting less worse. Once we have "turned the corner" and are creating the 100-125,000 jobs monthly, enough jobs to break even, I will be in the "getting better" camp.
Douglas Hendee
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).