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Weakness behind those payroll numbers

Posted Aug 07 2009, 02:45 PM by Anthony Mirhaydari
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Stocks rallied hard on Friday after the government reported 247,000 jobs were cut in July compared to the 467,000 lost in June. It was the best employment report we've seen in a long time: The drop in employment was the smallest since late last summer. The unemployment rate fell 0.1% to 9.4%.

Yet, after digging into the numbers it's clear that the increase in the unemployment rate is being driven by discouragement, not improvement, in the jobs market.

Some 422,000 people left the labor force last month. Compare this to the 6,664,000 jobs that have been lost since the recession began and it's clear that a large percentage of people are simply giving up hope. Philippa Dunne and Doug Henwood of the Liscio Report note that there is "some serious labor force withdrawal" at work.

Furthermore, it appears that an increasing number of workers are in industries that are in permanent decline or have skills that are no longer needed as the average length of unemployment widens to 25 weeks. Not only does this cast a pall over the back-to-school and holiday shopping seasons, but a contraction in the labor force will make it more difficult for businesses to find qualified workers once the economic recovery truly begins. This is bad news for the likes of Home Depot (HD) and JC Penney (JCP).

Overall, employment has now fallen 4.8% in this recession. Besides the 4.9% employment trough seen in the 1949 downturn, this has been the most severe job loss since the World War II war machine was shut down after V-J Day.

By sector, half of the 247,000 jobs lost in July were in goods production with 76,000 construction and 52,000 manufacturing jobs lost. Motor vehicles were up 28,000 thanks to seasonal adjustments and earlier-than-normal layoffs related to the production shutdown a few months ago. Private services dropped 126,000 with one-third of the loss coming from retail. Government added 7,000 because of a 12,000 increase in federal employment. Healthcare added 10,000 while leisure and hospitality rose 9,000.

Disclosure: The author does not own or control a position in any of the funds or companies mentioned.

Anthony Mirhaydari is a researcher for the Strategic Advantage investment newsletter. He can be contacted at anthony.mirhaydari@live.com. Feel free to comment below. 

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Comments

 

That does look like funny math.  We're still losing jobs, but total unemployment is down?  That's like saying to more I pour into the glass, the less full it becomes.  Well, I guess we've just been through a period of sales being down while profits are up, so it's not surprising that some numbers will be touted higher than others all while trying to ignore context no matter how backwards they seem.

Still, it amazes me how little good news can spark a market ralley.  The lastest bubble isn't housing, oil or gold, but optimism.  It's just a question of when we'll hit the wall again

We  can  stop  some  job  loss  by  supporting  companies  that  are  still  making  things  in the  US.  Go  to  www.locateamerican.com.  It  list  companies  still dedicted to the American  dream.  Ask  store  you  shop  at  to  carry  their  products and  purchase  them as  oppose to  the  ones "made  in  China".  Write  companies that  have  moved  their  factories  out  of  the  US  to  move them or  part  of  thier  operations  back  to  the  US  or  we  will  not  buy  thier  product.  As  long  as  we  continue  to purchase their  goods  made  everywhere  but the US,  why  should  they move  back?

Dot,you are right,is time to have productivity in USA if we want a solid ECONOMY oderwise we have to be prepare for a big mess.people buy only made in USA,is in our hands to fix this big mess.

Some bloggers are pushing the idea of Americans helping themsleves and to this notion I say HELL YES!

The United States of America has had a long standing reputation for helping the needy of the World and when it is our own time to help ourselves we get riff raff from the world about it it! I say BS! Our elected politicians cannot see clearly with glasses bought and paid for by special interest lobbyists and it will take common Tax Payers to rip the blinders off of our elected leaders! The future of America does not belong too the few it belongs to all of us! I have a proposal that I will post after this rant about our leaders and their herd of sheep. Read on if I have your attention:

If we continue on a path of borrowing money to help prop ourselves up then we need to invest the money wisely. We need to have positive returns with the money in the way of employment, manufacturing, green energy, technoligy, and future sustainable longivity. Inner city and urban connecting monorials and magnetic propulsion trains are a proposal for future generations to consider. An increase in Massive employment, investor freindly with sustainable returns, manufacturing explosions, tech jobs and the list is huge for positives verses negatives when it comes to money being well spent comming from the future workers wages and the notion that they (future Americans) are going to be the ones piggy backing this current spending spree. Put America too work now with this type of proposal. Real Americans would benifit and not the paper pushers of Wall Street and the Banking Industries. Vote with your mind and downsize! Vote third party and reduce the two party monster!

This is what I have to say, Don't blame me I did NOT!! vote for Obama.

He is sinking us even more and now his voters are turning against him.

He is gonna finish digging our graves for us while he has no idea what it is to suffer and go hungry to make your groceries strech so you can feed your children

Maybe he should go live in a tent and have no money he can touch along with no job to make any money and then see how how he reacts, not only is he NOT an american, he has no idea what it is to live like one right now.........

That Nonfarm Payroll graph says it all.  What bottom?  What recovery?  This recession is just getting started as we move to the "New Normal",  i.e. a lower standard of living across the board.  But we're being told by most of these talking head bizniz types to put on our rally caps.  What a bunch of crap.

I did not vote for Obama either, and consider him an arrogant socialist, bent on making the good old USA look like the rest of the Socialist Governments in the World. Unfortuneatly those that did vote for him are closing their eyes to the risk he represents and only want to hear the good news from the likes of MSNBC. They need to wake up and look at the real threats and begin taking actions to stop his "everything is a CRISIS"  management of our money. A good start is for everyone expressing an opinion here to quit takling to each other and begin talking to your congressman or congresswoman. They don't read a lot of E-mails so write them direct. We all need to do more than tell each other how we feel.

I hope Obama is a socialist.  A healthy dose of socialism is what the US needs.  The rich are not necessarily the "creators" and "producers" and do not deserve, nor are they entitled to all the wealth.  The US lags behind all of the "European style socialist" countries in all areas, except for two - the violent crime rate and the number of billionaires.  Having a lot of billionaires does not make for a prosperous country.  

The only reason that the unemployment rate fell 0.1% to 9.4%, was due to the 700,000 that lost a job in Jan. falling off of the reports as they have used up there 26 weeks.

Those collecting extended unemployment benifits are at an all time high, with a new record being set every week. Also, there are now a record number of people collecting food stamps.

If all Wall Street wants to look at for the good news is the first 26 weeks of unemployment where the % is determined, then the numbers will drop as the 6,664,000 jobs that have been lost since the recession began, will end up on the back end, adding yet again to that increasing record numbers.

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