By Markos Kaminis
(Wall St. Greek)
:
Last evening, after President Obama gave his speech to the
Democratic Party delegates in Charlotte, pundits speculated about
how long a post party high might last, and what could kill it as
quickly as today. The main suspect likely to assault the electorate
mood was the monthly
Employment Situation Report
, which was just reported this morning at 8:30 AM EDT. In my view,
the jobs report reflects a deteriorating economy offers catalyst
for change.
Some will key on the two-tenths of a point improvement in the
unemployment rate to 8.1%, from 8.3% last month, but such reports
should be quickly overcome by the realization that labor
participation, not job creation, played the key role there. Stock
futures turned lower at the breaking of the news, but it may take
some time for the real message of the report to be understood; the
SPDR S&P 500 ETF (
SPY
) is fractionally higher at the hour of publishing here, while the
Dow Jones Industrial Average ETF (
DIA
) is less enthused due to the details of the data discussed below.
The NASDAQ also has the earnings warning of Intel (
INTC
) to digest this morning, and so the PowerShares QQQ (
QQQ
) is sinking. But what is holding up stocks generally today is the
increased likelihood of Federal Reserve action later this month.
What is gaining ground today is gold against the dollar, as the
SPDR Gold Shares (
GLD
) gains 1.6% into early trade.
Job creation, depicted by a 96,000 net increase in nonfarm
payrolls, came in under July's revised rate of 141K (from 163K) and
the economists' consensus for 125K. Within the overall figure,
private nonfarm payrolls only rose by 103K, versus July's revised
figure of 162K (from 172K). Take note of the direction of the
revisions as well as the disappointment produced by the figures for
August.
Debunking the unemployment rate was not hard to do this morning,
despite the details of the report showing the number of unemployed
Americans was down by 250K in August, to 12.54 million. Rather, the
Household Survey shows the civilian labor force dropped sharply by
368K in August, even as the population was estimated higher by
212K. The same survey showed the number of employed Americans was
down
by 119K. Clearly, a big chunk of that
improvement
in the unemployed (if not all of it) was due to the continued
drop-off of the long-term unemployed out of the labor force, not
because people got jobs. Otherwise, the number of employed
Americans should have risen.
As we look deeper into the data, we see that the number of
long-term unemployed Americans (27 weeks of joblessness or more)
decreased by 152K in August.
There is a huge segment of the American population that is
simply being lost into limbo.
Who knows where they go, perhaps to homelessness, to prison,
hospitals of one sort or another, to other parts of the world, or
into their parents' basements to drift into deep depression. Maybe
a few are starting small businesses, self-publishing books, or
earning income off the books
in one way or another
, but it's clear that the majority are not faring well enough.
Some are working part-time instead of full-time, as the number
of part-timers for economic reasons (meaning they want more hours)
decreased by 215K in August, to 8.03 million. The number of those
who have chosen part-time work (some of these likely didn't
understand the survey question) rose by 130K. I say that because
school just started, and I believe less young people are likely to
seek part-time work when attending school, though some returning
from long vacations may be seeking work. Perhaps in today's
economy, a greater number of young people are finding resources
from home harder to come by, and must therefore work while earning
their degree.
The number of Americans marginally attached to the labor force,
meaning they did not aggressively seek work over the last four
weeks, increased by 32K. Within this segment, the number of
discouraged workers, or those people who believe there are no more
jobs available for them any longer, decreased slightly by
8,000.
Under-Employment Rate
The calculation of the under-employment rate, which takes into
account the number of Americans working part-time for economic
reasons and the detached workforce, follows here. If we add back
the excluded 2.561 million displaced workers to the labor market,
and include the 8.031 million underemployed part-timers in the
unemployed count, adjusted unemployment reaches ((12.544M + 2.561M
+ 8.031M) / (154.645M + 2.561M)) * 100 = 14.7%. Last month, the
rate was ((12.794M + 2.529M + 8.246M) / (155.013M + 2.529M)) * 100
= 15.0%. Don't be fooled by what looks like an improved rate of
underemployment to go along with the gain in the unemployment rate,
because this figure, like the other, leaves out the unexplained
decrease in the civilian workforce. Where have those unaccounted
for Americans gone? Please tell me if you know, because they are
not in this tally.
The details of the Establishment Survey show total private (not
including public sector) jobs increased by a net 103K in August.
That was significantly under ADP's estimate for 201K, which helped
support the stock market Thursday. It was likewise inconsistent
with the decline in Challenger's Monthly Job-Cuts data. What it did
reflect, was something I've been warning about, a
decrease in manufacturing employment
. That segment of the economy dropped 15K jobs in August, and while
jobs are not being shed by Boeing (BA) as yet, layoffs are
increasingly being considered at cyclicals like General Electric
(GE), Caterpillar (CAT) and Cummins (CMI). The entire
goods-producing segment of the economy shed 16K jobs, with most of
those coming in durable goods. There was even a 7,500 drop at motor
vehicle and parts makers like Ford (F), General Motors (GM) and
Magna International (MGA).
Private sector service providers added a net of 119K jobs in
August, according to the survey. The majority of those came in
Leisure & Hospitality (+34K), Professional & Business
Services (+28K) and in Healthcare &
Social Assistance
(+21.7K). Services declines were only found in Temporary Help
(-4.9K), which marked a reversal of recent months and was bad news
for Kelly Services (KELYA) today.
The Retail Trade industry added 6.1K jobs in August, I expect
due to increases at discounters like Wal-Mart (WMT), Target (TGT)
and Costco (COST), at the cost of underperformers like J.C. Penney
(JCP) and Sears (SHLD). Information only added 3,000 jobs in
August; so much for the impact of the Internet newcomers like
Facebook (FB) and Yelp (YELP). The public sector shed 7,000 jobs in
August, down from 21K in July and 18K in June.
On net, I think there's no doubting that this report favors
change, because when the workforce change is understood, it
reflects a deteriorating economy. I expect these reports are going
to get worse in the next two months ahead of the election. The
Democrats will focus on the unemployment rate today, but I expect
the Republicans will not have to explain that anomaly as the months
progress and the economy deteriorates further.
Disclosure:
I have no positions in any stocks mentioned, and no plans to
initiate any positions within the next 72 hours. I wrote this
article myself, and it expresses my own opinions. I am not
receiving compensation for it. I have no business relationship with
any company whose stock is mentioned in this article.
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