The Fed’s Got A Problem
The most recent employment report sent the financial market pundits abuzz claiming that the economy was on solid footing with no recession in sight. The problem, for anyone willing to actually look at the data, was the underlying data was mostly disappointing.
While the BLS trumpeted 242,000 new jobs in February, wages declined 0.1% and the average workweek fell by 0.2 hours along with aggregate hours worked falling a hefty 0.4%. Furthermore, part-time work soared in February while full-time job growth was mediocre.
But even stranger was that out of the 242,000 jobs, retailing saw a massive jump of 55,000 jobs. This is in a month when stores are not hiring a lot of part-time work to deal with a shopping season. Jeffrey Snider at Alhambra Partners picked up on this by pointing out the differential between actual retail sales and “hiring.”
“Starting April 2015, overall retail sales (again, including auto sales) fell below 3% on a 6-month average basis(meaning more than a one-month drop in growth rate) – and have remained closer to 2% than even 3%. In past cycles, that has meant initiation of contraction in retail trade employment and widespread recession. Not this time, however, as the BLS gives us a remarkable +313k gain (including February 2016) over the last 11 months. That equates to an astounding 28.5k per month.”
Pretty amazing. This is even more confounding when you look at the NFIB’s Small Business Survey which shows real retail sales and expectations of sales both on the decline.
But it is not just in “retail trade” that employment gains are an issue but rather throughout the entirety of the report.The obfuscation of the data is coming from the mathematical “seasonal adjustments” along with the “birth/death”adjustment which are adding jobs that aren’t actually there.
Think about it this way. If the unemployment rate were truly 4.9%, and jobs were actually being created at the fast clip since the 90’s, then labor force participation rates, along with wage growth, should be at similar levels. Right? Uhm....
Of course, the reason that labor force participation rates remain so low is that job creation has failed to exceed the growth rate of the working-age population. With the population growing faster than employment, the number of unemployed living in the shadows continues to swell.
