Sunday, 8 June 2008

US Unemployment Rate Leaps in May

Friday's US non-farm payroll report made for some interesting reading, none of it good. The headline number of a loss of -49,000. Job losses included:

construction -34,000
manufacturing -26,000
retail trade -27,000
professional and business services -29,000
service providing -8,000

As shown above the birth death model continues to amaze, with an estimated net 217k new jobs added in May including 42k in construction, WTF?

The real story was the leap in the unemployment rate, jumping from 5.0% to 5.5%. The spin from the media was that it was becasue of a hoard of teenagers entering the workforce. However, the entrance of teens into the workforce is only a small part of the story. The following from the BIG PICTURE:

"Teen unemployment rose 3.3 points, which was probably exaggerated by some calendar issues. But teens are less than 5% of the workforce, so they contributed just 0.2 point of the total rise. Adult unemployment rose from 4.5% to 4.8% - and it was a clean move, with no rounding funniness. The adult participation rate rose 0.1 point, and the EPR [Employment Population Ratio] fell by 0.2 point. Also, the composition of the unemployment rise shows that it wasn't just the kids: permanent job losers and re-entrants accounted for 0.2 points of the rise, and new entrants just 0.1 point.

If you want to spin a story out of this, it could be that people are re-entering the labor force because they're having a hard time making ends meet."

-Liscio Report

With 5 consecutive months of contracting payrolls and an unemployment rate now more than a full percentage point higher than the low of the cycle, there is no doubt the US is in recession.