Evidence that the United States is sinking deeper into recession continued to emerge in the past few days, most emphatically with a dreary report out of federal labor statisticians on the current state of employment.
While not truly horrific, the July 2008 employment situation report issued by the Department of Labor on Friday, August 1st reveals a country that is both steadily losing jobs and seeing the number of hours worked by workers diminish.
Let me give you perspectives on the numbers, which can be viewed on this Bureau of Labor Statistics web page, from two super-sharp independent analysts. First, from Philippa Dunne of the Liscio Report:
1. It was a weak employment report, offering further evidence that the U.S. is in recession. While the headline job loss of -51,000 was relatively modest, the private sector shed 76,000. Of that, goods were off 46,000, and services were off 30,000. Construction lost 22,000 with about two-thirds coming from residential. The factory sector lost 35,000, evenly divided between durable and nondurable. Within private services, losses were widespread with the worst hit retail, -17,000; information, -13,000; professional and business services, -24,000.
2. About the only large positive numbers came from health care (+33,000). Its former companion in strength, bars and restaurants, looks to be experiencing last call: It was up just 3,000, a fifth its average over the last year. Government added 25,000, all of it state and local; the feds dropped 3,000.
3. June’s loss, originally reported as -62,000, was revised up by 11,000 to -51,000—but all because of a 14,000 upward revision to government employment. The private sector loss was marked up by another 3,000 to -94,000. Although May’s headline was revised up by 15,000, the private sector came down by 8,000.
4. Total job losses this year are now 463,000, but there’s been 651,000 lost in the private sector. While most of the bloodletting in 2008 has been in goods, private services are off 129,000.
5. These are not big numbers compared to earlier recessions. In May 1980 alone, for example, we lost 429,000 jobs, with a much smaller workforce—but they do paint a picture of steady erosion.
6. We’ve now had seven consecutive months of job loss. That’s important because we’ve never seen more than three consecutive months outside a recession, and we went eight consecutive months during the recession of 1973 to 1975 without a negative number.
7. Average hourly earnings were up 0.3% for the month and 3.4% for the year. Both measures were the same as in June. Hours measures were quite weak. The average work week fell to 33.6 hours, matching its all-time low. Aggregate hours were off 0.4% for the month, a full standard deviation below the mean. While it’s no surprise that hours in goods production have been soft, it is surprising to learn that the yearly gain in aggregate service hours, at just 0.3%, is 1.25 standard deviations below the mean. There just isn’t much demand for labor.
8. The unemployment rate rose 0.2 point to 5.7%, the highest in more than four years. Teens contributed 0.1 point of the gain, as their jobless rate rose 2.2 points. The rate for adult men rose 0.2 point, accounting for the other 0.1 of the headline rise. Adult women did better, dropping 0.1 point, but that contributed nothing to the total. While some analysts might dismiss the teen rate as secondary, it is a sign of trouble that the job market can’t handle the usual summer influx.
9. Continued weakness in employment and declining wage pressures should ease inflation anxieties at the Federal Reserve Board. And the forward-looking measures in this report, like the work week and temp and retail employment, suggest more of the same in the coming months.
Grim as it sounds, that was the optimistic view on the status of workers.
Now we turn to Charles Biderman of TrimTabs, who does great statistical work in Northern California. Biderman believes that the Bureau of Labor Statistics’ figures are wrong because of a faulty survey technique.His work suggests that 169,000 jobs were lost in July—the worst one-month number since March 2003.
Biderman’s figures come from his firm’s analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees. "Job losses accelerated in the last two weeks of June and could have topped 300,000 if crude oil prices had not retreated from $147 per barrel," Biderman said.
TrimTabs estimates the U.S. economy has lost 734,000 jobs in 2008 and expects job losses to worsen in coming months. Meanwhile, their work suggests that wages of all U.S. workers on payrolls rose only 1.6% year-over-year in July, well below the 3.1% year-over-year level indicative of job growth.
A lot of the blame can be laid to elevated oil prices, which are 30% higher than the inflation-adjusted peak in the recession of the early 1980s. "We are just beginning to feel the pain of high oil prices, which means hefty job losses are going to be with us well into fall," Biderman said.
Many of the people pushed out of full-time work are falling into part-time jobs that pay, on average, 20% less per hour and offer no retirement or health benefits not to mention little job security.
Part of the blame falls on globalization, a titanic force radically changing the nature of work. Electronics goods and clothing at Wal-Mart are amazingly cheap today because of globalization, but at the same time it’s costing people the jobs needed to buy them. The genie is out of the bottle, and consequences are dramatically affecting capital flows and the quality of life.
Of course, unemployment and underemployment are not just a U.S. phenomenon. Corporate sociologist Jim Williams points out that more than a third of the labor force in Japan—the country we used to fear much more than China—are now categorized as "nonpermanent" workers. The Japanese used to find security and hope in their companies, he notes. Now young Japanese have unstable jobs and say they feel they do not belong and have no future. Meanwhile, unemployment is rising in the United Kingdom at its fastest pace in years; services jobs in Australia are thinning; and even India is losing much of its IT outsourcing leadership to China.
The bottom line: Jobs are the bedrock of the U.S. and world economy. We know from academic studies and common sense that people who don’t have jobs don’t buy things, and people who know people who are losing their jobs also curtail their purchasing. It’s a vicious cycle, and it continues.
Jon Markman is editor of Trader’s Advantage and a regular contributor to InvestorPlace.com. To get this type of actionable insight from Jon and other InvestorPlace Media experts go to www.InvestorPlace.com today!
