Here are some excerpts from John Mauldin's newsletter dated 5/2/08. In essence, his newsletter explains in detail why the employment report last Friday was much more disastrous than the headline suggested, once one digs into the numbers. For example, he explains why the unemployment rate fell even thought population increased and jobs were lost:
April, for whatever statistical reason, has shown the highest number of birth/death jobs for any month. In 2007, the BLS estimated that 262,000 were created in April that they could not account for in the survey of businesses. Somehow, the spreadsheets at BLS had them add 267,000 jobs in April of 2008. That number includes an estimated 45,000 new jobs in construction! And this in a time when both residential and commercial construction are contracting. The actual survey results showed that construction jobs fell by 61,000.
And somewhere, they estimate that 8,000 new jobs in finance were created. As Philippa Dunne notes: “It may be that the gains in our old friend, bars and restaurants, are the [birth/death] model's creation; it added 83,000 to the leisure and hospitality sector. With vacation plans at near-record lows, and restaurants reporting reduced traffic, many of these job gains could disappear in the next benchmark revision.”
Without that addition from the birth/death number, total private employment would have dropped by 296,000. Now, if that had been the headline number, the market would have tanked. Now, I have no doubt that the economy did create a lot of new jobs last month. But when the final revisions are in, we will see that job losses were well south of 100,000.
Unemployment supposedly dropped last month by 0.1%, to 5%. How could a loss of jobs mean a rise in employment? Because the statistics mask a rather disturbing trend. The number of people working part-time is rising rapidly, and they are counted as employed. Again, From Philippa Dunne of The Liscio Report:There is other frightening stuff in it. Read it in its entirety here:
“Almost 3/4 of the gain in non-agricultural household employment [from the household survey] came from those working part-time for economic reasons, and another 83% came from what used to be called ‘willing' part-timers. Yes, that adds to more than 100% – 154% to be precise – because fulltime employment declined by 375,000. The increase in those working part-time for economic reasons was at the 93rd percentile of all months since the series began in 1955; the decline in fulltime employment was at the 90th percentile.”
This employment report was ugly, when you look at the numbers under the headline statistics. It is no wonder consumer sentiment is down.
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