Employment Disaster

The Daily Reckoning ^ | September 24, 2003 | Kurt Richebächer

[Starwind]

I'll shortly post a table showing the monthly upward revisions to NonFarm Payroll losses.

[Brian S]

Boy oh Boy...I'm going to make a killin on this thread! ;)

[Beck_isright]

If anyone on this board believes one government economic statistic, please email me. I want to sell you an 8,000 foot mountain in South Florida.

[maestro]

No Problem.............until after WW-III is over,.....then.....

;-(

[Starwind]

In addition, the Labor Department is employing month for month the same two practices that camouflage the horrible reality. In July, for example, it reported a decline in payrolls by 44,000, while job losses for June were revised upward from 30,000 to 72,000. For May, the retrospective upward revision was even from 17,000 to 70,000. As such upward revisions of job losses in the prior month have become a regular feature, this practice has the convenient effect of producing correspondingly lower new numbers every month.

So, note in the table below (my construction from the linked reports), if you read up a given column, you can see the increased revisons in NonFarm Payroll losses. Every month, except for January) a NonFarm Payroll loss was reported and a larger loss reported as a revision in the following months. April seems to be one exception were the revisions were smaller. The appearance being that in the initial reporting month, losses aren't as severe as they are later revised.

Nonfarm Payroll (1,000s) Aug   July  June   May   April  March   Feb    Jan
August report            -93    -49   -83      
July   report                   -44   -72   -76    
June   report                         -30   -70     -22  
May    report                               -17    unch   -151
April  report                                       -48   -124   -353
March  report                                             -108   -357    
Feb   (March revison)                                            -308   203
Jan   (March revison)                                                   185

• U.S. Aug nonfarm payrolls fell 93,000
  
• U.S. July nonfarm payrolls fell 44,000
  
• U.S. June nonfarm payrolls fell 30,000
  
• U.S. May non-farm payrolls fell 17,000
  
• U.S. April nonfarm payrolls fell 48,000
  
• U.S. March nonfarm payrolls fell 108,000
  

[StatesEnemy]

I'm sure these are just jobs that Americans don't want to do. No worries.

[BfloGuy]

In any case, actual, historical experience in the 1970-80s with large-scale government deficit spending has been anything but encouraging. It created more inflation than economic growth. Over time, rising deficits were rather recognized as impediments to economic growth

Bull-oney. In the eighties, once the value of the dollar had been stabilized, inflation virtually ended while growth accelerated -- despite growing deficits.

[Batrachian]

I'd like to postulate that the recession is exacerbated by job loss, not the other way around. A recovery doesn't matter if millions of jobs are exported to China, Mexico, and the rest of the third world.

So, in short, unemployment as a result of job flight is worsening the recession, rather than the recession causing job losses.

That my theory and I'm sticking to it (I'm sure others have thought of this, but maybe not stated it in quite this way).

[A. Pole]

All it needs to activate this statistical job creation is a unilateral decision by the government that the economy is in recovery. Once a year, the statisticians reconcile their assumption with reality by a revision. When they did this in May of this year, 400,000 new jobs that had been reported earlier simply vanished. Such revisions, of course, take place outside the monthly reported job losses.

Interesting article.

[AEMILIUS PAULUS]

Well. We are having a boom in diversity. Look at California.

[Starwind]

So, in short, unemployment as a result of job flight is worsening the recession, rather than the recession causing job losses.

Well, technically the recession ended Nov '01, but rising unemployment is indeed a drag on recovery, subtracting ui payments, bankruptcies, repos, etc., from GDP and not adding production and taxes.

But unemployment doesn't cause recession (which I don't believe you argued), but falling employment is often a leading indicator of recession. I believe we will slip back into recession for reasons which will become apparent after companies disclose their true fiscal problems, of which offshoring and layoffs continue to be a leading indicator.

[conservativecorner]

I get daily e-mails from them, and they are very anti Bush in their musings. I think their political persuasion shows through on much of their work.

[waterstraat]

The more americans that lose jobs to asia, and to the communists, the less taxes that they pay. There is no recovery. Some american companies might be making more money with cheap foreign laborers, but that is not a recovery, its switching from free labor, to slave labor.

There will come a point when we pass the point of no return, and it wont be easy, or it may even be impossible to get back our manufacturing and high tech.

[maestro]

The results of WW-III

[Brilliant]

Need to see the breakdown between the states. I'm guessing that a disproportionate number of the losses are in Cal., Or., and Washington, three states where the liberals have had their way, more in NY and MI, where the liberals are equally strong.

[Hermann the Cherusker]

These adjusted numbers are meaningless. The raw numbers are all that count.

This "recovery" is no different than the "recovery" of 1991-1992. Something has fundementally changed in the US economy since 1983 that changes the behavior of the business cycle. We have much longer periods of growth now and much longer but less sharp recessions.

[A. Pole]

A recovery doesn't matter if millions of jobs are exported to China, Mexico, and the rest of the third world. So, in short, unemployment as a result of job flight is worsening the recession, rather than the recession causing job losses.

Fair trade would be directed toward general development both of United States and trading partners like China and India while raising standards in the later two countries. This would be a positive sum game.

The race toward the bottom and contraction of economies might hurt India and China too. This is a negative sum game.

Moderate tariffs with lowered payroll tax would reward businesses hiring American workers and treating them well. And fair trade would allow China and India to grow and compete in a sustainable way.

[A. Pole]

But unemployment doesn't cause recession (which I don't believe you argued), but falling employment is often a leading indicator of recession.

This works both ways. Falling employment can deepen recession in a vicious circle.

[Starwind]

I get daily e-mails from them, and they are very anti Bush in their musings. I think their political persuasion shows through on much of their work.

"Them" is a wide collection of writers. Richebächer lives in Cannes and is very negative on the economy, US and global, but I don't recall him targeting Bush.

That said, these problems started a decade ago for which Greenspan is largely to blame. Bush's reappointment of him and leading the largest deficits on record are arguably Bush's fault.