The No-Good, Terrible May Jobs Report
It's hard to conclude anything other than that the May jobs report was a complete and utter disaster for the economy and, perhaps, President Obama’s chances for reelection.
Employers created just 69,000 jobs last month, the Labor Department said on Friday. That’s the fewest since May of last year. Economists had been expecting nonfarm payrolls to increase by 150,000. (In fact, the result was lower than what any economist polled by Reuters had predicted.)
Moreover, companies added 49,000 fewer jobs than previously estimated in March and April. Talk about a slowdown. The average monthly gain was 226,000 in first quarter vs. an average of just 73,000 in April and May.
Oh, and the U-3 unemployment rate rose to 8.2% from 8.1%. The broader U-6 gauge, which also measures underemployment, rose to 14.8% from 14.5%. The labor force participation rate did, finally, tick up to a still-low 63.8%, lending credence to the idea that the shrinking workforce reflects discouraged workers and not just demographics. Here is a sample of Wall Street opinion:
-- JPMorgan: "The May jobs report was disappointing and demoralizing ... Given the steady deterioration in labor market performance over the course of the year, our outlook for decent growth in the middle quarters of the year is now looking shopworn."
-- Barclays Capital: 'The May employment report suggests that the labor market recovery has lost significant steam in recent months.
-- IHS Global Insight: "2012 is beginning to look horribly like 2011 – initial high hopes that the recovery was kicking into high gear, subsequently dashed."
-- Citigroup: "Signs of extraordinary and lasting weakness in U.S. labor markets have been evident since the start of the expansion ..."
And a couple of factoids that give some insight into the true strength of the labor market
1. If the size of the U.S. labor force as a share of the total population was the same as it was when Barack Obama took office—65.7% then vs. 63.8% today—the U-3 unemployment rate would be 10.9%. (Now, this doesn’t take into account the aging of the Baby Boomers, which should lower the participation rate due to rising retirements. But is that still a valid assumption given the drop in wealth since 2006?)
2. If you take into account the aging of the Baby Boomers, the participation rate should be trending lower. Indeed, it has been doing just that since 2000. Before the Great Recession, the Congressional Budget Office predicted what the participation rate would be in 2012, assuming such demographic changes. Using that number, the real unemployment rate would be 10.5%.
3. And, as the above chart shows — originally from Obama economists Christina Romer and Jared Bernstein in January 2009 –the current 8.2% unemployment rate is 2.5 percentage points above where Team Obama predicted it would be right now if Congress passed his trillion-dollar stimulus plan.
4. The median duration of unemployment rebounded to 20.1 weeks in May, and 42.8% were unemployed for longer than a half year.
5. Average hourly earnings rose just 0.1%. Coupled with a very stable overall inflation rate, real wages were likely flat in May.
The big question now: Does this report suggest the U.S economy is heading into recession, especially given the sharp slowdown in global economic activity from Europe to India to, perhaps most worrisome, China?
Consider this: Last year, the U.S. grew at just a 1.7% pace. Research from the Federal Reserve finds that that since 1947 when year-over-year real GDP growth falls below 2 percent, recession follows within a year 70 percent of the time. We are firmly within the Recession Red Zone.
The political implications are clear: Another Recovery Bummer. If you punch in a mild recession into the higher regarded Fair-Yale forecasting model, Mitt Romney wins 53-47 over Obama in the two-party vote share. But given the example of Jimmy Carter, who suffered a mild recession in his 1980 reelection year, the Fair model might be underestimating the damage to Obama from a double dip.
Bottom line: If Team Obama wasn't already in a state of panic, they probably are now. And U.S. workers shouldn't be far behind.
- Comment (28)
- · Quote
- · UnfollowFollow (2)
- Pages:
- 1
- 2
Comments:
Jun '10
Re: The No-Good, Terrible May Jobs Report
CJRun: C.U., I think this concept could be put to general use:
Fail to implement Single Payer Medicine and we will be under constant threat of tiger attack.
Allow access to America's natural resources and we will be under constant threat of tiger attack.
Extend the current rates for marginal income taxes and we will be under constant threat of tiger attack.
Require photo identification at the polls and we will be under constant threat of tiger attack.
Everybody now! · 59 minutes ago
Wow! Do you have a link to the "Tiger Attack Index." It was stable for so long I quit looking at it. I wasn't aware it had been skyrocketing lately.
Re: The No-Good, Terrible May Jobs Report
I actually blogged about that chart. To me, that shows slowing momentum that was never really very strong to begin with. 1Q is probably as good as it gets by a long stretch
Western Chauvinist
This graph is similar to the one Peter Meza provided above, except it comes from the WH website, where the spin is:
Apr '11
Re: The No-Good, Terrible May Jobs Report
tabula rasa
CJRun: C.U., I think this concept could be put to general use:
Fail to implement Single Payer Medicine and we will be under constant threat of tiger attack.
Allow access to America's natural resources and we will be under constant threat of tiger attack.
Extend the current rates for marginal income taxes and we will be under constant threat of tiger attack.
Require photo identification at the polls and we will be under constant threat of tiger attack.
Everybody now! · 59 minutes ago
Wow! Do you have a link to the "Tiger Attack Index." It was stable for so long I quit looking at it. I wasn't aware it had been skyrocketing lately. · 2 hours ago
A tiger like its European cousin the bear always attacks when you least expect it.
Dec '10
Re: The No-Good, Terrible May Jobs Report
You know, if we get too fat, we will be under constant threat of tiger attack.
Dec '10
Re: The No-Good, Terrible May Jobs Report
Palaeologus
Valiuth
C. U. Douglas
"Without the Stimulus, not only would we have been unemployed, but also under constant threat of tiger attack." · 27 minutes ago
I believe that tiger attacks are only a problem for people who haven't bought a tiger repelling rock. · 6 minutes ago
I can never get those to work. Stupid technology. · 7 hours ago
What you need is a tiger repelling rifle.
Then, even if the repellent effect proves weak, you can always shoot the offending critter.
Feb '11
Re: The No-Good, Terrible May Jobs Report
Would that be the Inquisitive Spanish bear?
Valiuth
A tiger like its European cousin the bear always attacks when you least expect it. · 8 hours ago
No one expects them...
Sep '10
Re: The No-Good, Terrible May Jobs Report
Every time Obama starts making excuses I'm reminded of a Heinlein quote
"Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.
This is known as “bad luck.”
May '10
Re: The No-Good, Terrible May Jobs Report
James, the surprising thing about these numbers is that they come as a surprise.
Could you explain sometime how, given the situation of excessive debt through government spending that has created a problem of global cataclysmic proportions, how GDP can be considered a useful measure? I would think that eliminating the Government spend portion of the calculation would provide a much more useful insight into economic health.
It seems to me that our mega deficits serve to artificially inflate a GDP number that in turn serves to hide the cancerous effects of the debt created - in the USA and just about every other major developed nation economy except Germany and Switzerland (so far).
Obama can use all the excuses he can find that the gullible will believe - but outside of trashing the dollar for fleeting export advantage, I can not find one policy by his administration that is actually geared to foster economic and employment growth. Perhaps I have missed something but I truly can not think of one single meaningful policy that has been helpful in this regard.