Saturday, 6 September 2008

US Employment Continues to Deteriorate

On Friday, the US Bureau of Labor Statistics released the monthly non-farm payroll report which showed a net -84,000 jobs were lost in the month of August. That makes the 8th straight month of job losses for the US economy. Below are the main job loss and gain catergories;

construction -8,000
manufacturing -61,000
retail trade -20,000
service -27,000
prof & bus services -53,000
leisure & hospitality -4000
education & health services +55,000
government jobs +17,000

Also of importance were the revisons to prior months. And here is why they are important. Back in July, on the eve of the NFP report I noted that we could see triple digit declines (more than -100k) in NFP's for June. The report subsequently showed job losses of only -62k. Then last month it was revised to a loss of -51k . Yesterday June was revised to a loss of -100k. So it pays to look at the revisions. Total revisions caused an extra -60k in job losses to be recognized for the preceeding two months.

The unemployment rate soared to 6.1%. Of course the permabulls said this was an aberration caused by more people staying on the recently extended unemployment benefits. Remember that the permabulls said the spike in the unemployment rate from 5.0% - 5.5% from April to May was due to teenage workers entering the workforce. Interestingly, that aberation has stayed.

Debate still rages at whether the US is in a recession. The above chart says quite clearly the US is in recession. The only time you see sharp upward spikes in the unemployment rate are during recessions.

Lastly it wouldn't be a NFP report without talking about the infamous birth death adjustment. Just to recap, the B/D adustment tries to estimate the number of jobs lost as a result of businesses going under and the number of jobs added as a result of new businesses being created. Incredulously, the BLS claims that a net 125k jobs were created in August. Yeah right.