The Latest Employment Report: Undeniably Very Good News
WOW (but notice the inevitable “yeah, but” at the end of the third paragraph):
The U.S. unemployment rate dropped to its lowest in nearly 5-1/2 years during October as 92,000 more jobs were added and hiring in each of the two prior months was revised up, a government report on Friday showed.
The October new-jobs figure was below Wall Street economists’ expectations for 125,000 but the Labor Department said a total 139,000 more jobs were created in August and September than it had previously thought. It revised up September’s job-creation total to 148,000, or nearly three times the 51,000 it reported a month ago, and said there were 230,000 new jobs in August instead of 188,000.
The unemployment rate fell in October to 4.4 percent from 4.6 percent in September. It was the lowest unemployment rate since 4.3 percent in May 2001 and was likely to fan concerns that labor markets are growing tight and could contribute to inflation pressures.
(Aw geez, Reuters, it’s always something, isn’t it?)
That’s a net gain of 231,000 jobs (92 + 139). I believe that the strong upward revisions to August and September make it more likely that final GDP growth will be higher than the preliminary 1.6% reported last week.
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UPDATE: Some dives into the details –
- According to the Household Survey, the number of people employed increased by a whopping 437,000 in September, and 708,000 in the past two months (see this previous post for a discussion of the Household Survey, used for calculating the unemployment rate, and the Establishment Survey, used for reporting the number of new jobs).
- How about this:
The differences between Clinton Era and Bush Era unemployment rates are getting pretty narrow:
– Clinton calendar year average (1993 - 2000): 5.20%
– Bush calendar year average (Jan. 2001 - Oct. 2006): 5.31%
– Clinton budget responsibility average (Oct. 1993 - Sept. 2001): 4.99%
– Bush budget responsibility average (Oct. 2001 - Oct. 2006): 5.43%
UPDATE 2: Check out the silliness of the third paragraph at this second Reuters link in the context of the first two:
All told the 92,000 total net jobs added in October were the fewest in a year, when the economy was suffering the blow of the Gulf Coast hurricanes.
That disappointment, however, was offset by much better job gains in the previous two months. Employers added 148,000 jobs in September, versus the 51,000 first reported. Payrolls grew by a robust 230,000 in August, stronger than the 188,000 slots previously recorded.
That comes against a backdrop of a slowing national economy.
Let’s see. Our balance of payments deficits indicate that we are shipping more than 5% of our GDP overseas every year. Our savings rate has been negative every quarter for a year and a half.
I came through Flint, Michigan in August. The radio was advertising job fairs for auto parts workers @$10 per hour. These folks could return to work their old jobs - at a 2/3 pay cut.
These employment figures are meaningless.
Comment by Mike Roser — November 3, 2006 @ 1:01 pm
#1, that’s because MI has had to endure 4 years of Jen Granholm. Real incomes are up in every quintile across the country. All your claims about the numbers being meaningless are themselves meaningless, and can’t change the truth..
Comment by TBlumer — November 3, 2006 @ 2:45 pm
‘Real incomes’ are not up after the gross numbers are corrected for inflation. ‘Real’ savings are a disaster after future entitlements are factored. I suggest you plug into the Comptroller of the Currency who is touring the country ringing his tocsin. You might spend some time reading the publications of the Federal Reserve.
Michael Moore’s came out long before Granholm. Suggest you read Friedman’s book. There’s a big problem out there for most people that can’t be papered over with interpolated numbers.
Today, there appears to be class warfare going on, with the rich getting much, much richer. I should be dancing in the streets, but I don’t believe that I can truely do well unless my neighbors can as well.
As an investor, I was struck by the fact that Halliburton’s Return on Equity while being led by Cheney was
Comment by Mike Roser — November 3, 2006 @ 3:11 pm
Sorry, real incomes ARE up after adjustment for inflation. You are W-R-O-N-G. Even the NY Times conceded that point months ago.
I think you meant to say that *Roger and me* came out before Granholm could wreck the MI economy. I will concede a point that GM, Ford, and Chrysler along with the UAW, built up an unsustainable cost structure, and are paying a very dear price for having done so. Nobody has clean hands, but they had plenty of warning, watching the USW and the steel industry vaporize, but pretended they would somehow be different.
Though they have been quiet recently, it appears that if they had their way, taxpayers would absorb the costs of all the management-union promises that cannot be kept. You have already in effect indicated that the LT issue with entitlements precludes that option.
I have no idea what you wanted to say about Halliburton, nor do I care.
Comment by TBlumer — November 4, 2006 @ 12:16 am
You’ve gotten so used to trying to fool others that you’ve started to believe your own stories.
In constant currency terms measured as commodity baskets, energy, euros, housing, transportation, etc. real wages have not outperformed inflation. Average wages have gone up, median wages have stayed flat. And that’s a real big problem. It’s been made all the worse by Al Greasepan bubbleomics.
But hey, Berkshire Hathaway just announced a blow out quarter, so what’s the worry?
Comment by Mike Roser — November 4, 2006 @ 2:39 am
#5, the Census Bureau says otherwise, as does having one’s eyes open.
Comment by TBlumer — November 4, 2006 @ 3:03 am
As an investor who has achieved 15-20% annual return on my money over the past 15 years, I spend alot of time with my eyes wide open. And I don’t like what I see. I’ve found that I have to look behind published figures. I’m able to way out-perform the S+P Index by betting against the crowd, betting against most published reports, betting against the popular media.
So let’s look at that Census Bureau data: The Census Bureau counts noses every 10 years. In between those decade points, they interpolate and extrapolate. ie, the data are their ‘best guess’. Given the fact that they go back and readjust their numbers later, why should anyone presume their current figures are a valid picture of reality? (Worse, the Census Bureau leaders are part of the Executive Branch and relies on it for funding and career advancement. Is it possible that some of the modifying guesses are politically motivated?)
Here’s another view of the employment picture: http://www.stateofworkingamerica.org/news/SWA06Facts-Income.pdf
Although their data only runs through 2004, wages have a long way to go to surpass the inflation line drawn from 2000. More important, household spending HAS continued to climb as if median incomes were were rising as the Census Bureau reports are indicating. The explanation seems to lie in the Federal Reserve data showing that personal savings during that time has turned negative. Ordinary families have been eating their seed corn to keep their standard of living; not good.
And this economic picture comes with interest rates the lowest they’ve been in my lifetime, huge tax cuts, and massive pump priming by the Federal Government through healthcare entitlements, expansion of the Defense Department, Homeland Security grants, education subsidies, general enlargement of the Federal Government, coupled with huge tax cuts.
Something’s gotta give.
Comment by Mike Roser — November 4, 2006 @ 10:26 am
#7, so now Bush is cooking the books (but Clinton, who with no core was more likely to have done so) didn’t?
Real incomes were flat or declining from 2001 to 2004 (9/11 had a lot to do with that), but has come back since then, and over a much longer period of time, it’s not even arguable that people are not better off now than they were.
As a presumably astute investor, you should know that the savings rate is the shakiest number out there; it falls out after everything else.
The data on wealth belie your claim that a majority, or even substantial pluralty, of families are eating their seed corn. There is a core 10%-15% who are doing that.
I guess it’s safe to assume that you’d be in favor of major spending control and the FAIR tax?
The best back-door proof that incomes are rising faster than inflation is this — over the long-term, initially calculated Social Security benefits, which are based on wage growth, have gone up faster than inflation by a substantial margin since annual revisions to benefits began in the mid-1970s. But of course, so has everyone’s definition of a minimally acceptable standard of living which today includes cable TV(s), wireless phone(s), computer(s), iPod(s), 3000 Sq Ft. houses, etc. etc.
Comment by TBlumer — November 4, 2006 @ 10:50 am
As much as they try, they cannot use emotion and talking points to negate facts & logic huh, Bizzy? Nail ‘em on one thing, they sprint to the next political pet rock of the day.
I wanna be like Bizzy! >;o)
Comment by Tess — November 4, 2006 @ 12:16 pm
For most families their major asset is their home. Home ownership is at an all time high by any metric. Home prices over the past few years have gone up far faster than inflation, and the time-honored metrics of spending no more that 2.5-3.2X one’s income on a house has been tossed out. Many places in this country the metric has become 4,5,6,7 even 10X. IMHO this is living dangerously because a house is a passive asset that doesn’t put on a tie and go to work each morning. It’s akin to buying a piece of art that requires maintenance (but you can live in).
The arguement for such an investment is that historically house prices haven’t dropped in value, so homeowner equity can be extracted via sale. Well, we shall see. Certainly housing busts have occurred in the past in certain localities. After the last Fed meeting, Yellin remarked that there were ghost towns around Phoenix and Las Vegas - new subdivisions with no people.
But more worrisome, and here’s where the seed corn analogy comes in, folks have been tapping the equity in their homes as if they were ATM’s. NegAm, Option ARM, 100%, 50 year, home equity loans, etc. have reduced homeowners putative net equity. In some parts of the country 60-70% of the houses sold in the last 2-3 years were accomplished via this mechanism. (In my neighborhood folks proudly show off their million dollar houses, but when I check Lexus Nexis, I see million dollar mortgages. These folks are living on the edge.) Let’s hope that Schiller is wrong. Because if real estate prices start falling (perhaps only to 2002 or 2003 levels) a huge number of families will find themselves upsidedown. (Meanwhile real estate taxes will continue at the high valuation, energy costs for heating and cooling will continue to escalate, and maintenance costs will remain.)
I don’t know how to interpret Social Security. I know that it was originally set up to be a safety net, but now has become a retirement entitlement. I know that it’s funded by one of the most regressive taxes around. I know that Bush spent significant political capital a Social Security problem that won’t emerge for decades while ignoring current bloated Federal spending on unproductive ventures.
I disagree that 9/11 had terribly much to do with the failure or the median income to grow. I’d blame this phenomenon on globalization. Ordinary workers in the US are now competing with workers in other countries who can, and will, do their jobs for a fraction of US wages. Unskilled and semi-skilled labor has become commoditized. Capital is the restrictive element. (But with Easy Al and ‘Helicopter Ben Bernacke’ dropping bales of money it’s hard to even argue that point.) Suffice it to say, the Dow at 12,000 and massive corporate/private buyouts going on are a reflection of the huge amount of capital sloshing around in the system.
Things just aren’t what they seem. Most of the job creation appears to be non-value-added service positions. Many of our brightest and best have gone into Wall Street to engineer new forms of paper and new ways of swapping it. Go figure?
Comment by Mike Roser — November 4, 2006 @ 2:18 pm
Mike:
If the housing bust occurs because builders cannot sell new homes, that affects the builders but not consumers, unless prices drop so much that existing homeowners are affected. Most of the reports I have seen in the past 4-6 weeks have the econs and analysts predicting that we are at the bottom and that prices will not go up much for a while. After a couple years of double-digit nationwide increases, why is that a surprise.
There is an issue with people living on the edge, and they are in the 10%-15% I mentioned earlier. I am as unhappy as anyone (and you would know this if you dig through the blog enough) that credit standards were lowered by Freddie Mac and Fannie Mae (independent of any administration influence, as far as anyone can tell — they are are publicly-held quasi-government entities) to the point where anyone with a pulse could buy a home.
I suppose you will be among the first to encourage people to sign up for the financial budgeting/debt elimination model I will be debuting after the election (assuming I can find time to finish it in between responding to 533-word comments :–>)?
Your take on SocSec as regressive is shocking; it is anything but that, and someone who invests as you say you do should know that:
- if you made $20K a year inflation-adjusted through a full working career and retire at the SocSec normal age, your benefit starts at about $11K
per year
- if 80K a year, your benefit is about $23.5K per year.
- the higher earner paid four times as much into the system for about double the benefit. That is a lot of things, but regressive sure as heck is not one of them.
We can disagree about the effect of 9/11, I suppose, but what it did is make businesses unbelievably cautious about capital investment for several years, and I am not sure that has been shaken, even yet.
We cannot wall ourselves off from the world, and the uneducated are definitely getting stiff competition. I would assume that means you are for charter schools, school vouchers, and the like to liberate inner-city kids from failing schools and force those schools to compete?
I do not believe your non value-added service positions characterization of new jobs is supportable. In fact, Biz Weak had a big article about how health care has been the industry where the largest employment pickup has occurred.
Comment by TBlumer — November 4, 2006 @ 3:39 pm
Regressive in that it hits middle class self-employeed hardest. Above $30K tax is Fed 25% + SS 15% + state (many 7-9%) which means that wage earners are being taxed at ~50% rate.
I compare that with my rate which is about 15% total income tax because I don’t pay myself a salary. And I have already logged my 40 quarters.
No more posts from me.
Ciao
I’m not a great fan of charter schools because they don’t seem to be working well, and I believe that a good school costs a lot more than the voucher. Education in the US in general is laughable. I’m a regular donor to Walnut Hills High School in Cincinnati. Every region should have one.
Real estate - many areas of the country have economies that revolve around construction, finance, and sales. I believe that there’s much more pain to go. At your leisure look at this view from the UK: http://www.dailyreckoning.co.uk/article/031120063.html
Comment by Mike Roser — November 5, 2006 @ 12:03 am
#12, I agree that if you figure in every tax the middle class esp self employed ($40K up to the SocSec limit) get socked, but that’s not what you were talking about.
Comment by TBlumer — November 5, 2006 @ 12:10 am
Yes, that’s indeed what I was talking about. It’s a regressive tax on the middle class.
I’m worried about the middle class in the US. Free Enterprise middle class, not government worker middle class. (If you break down that new jobs report the largest employment sector was government.)
Comment by Mike Roser — November 5, 2006 @ 10:17 am