Employment Report - Harry's Good News

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Employment Report

The latest Employment Report release offered what Harry Reid called "good news," since only 36,000 Americans lost their jobs in February on net. Congressman Reid later clarified that he meant it was relatively good news, which every American with half a brain guessed anyway. When you are a politician, it seems, you can't take anything for granted though.

Can it really be the case that America will believe whatever it is told? Is there no critical thinking among the masses? Are there really people out there wired so wrongly that they could take some kind of joy from such bad news, as it was assumed Harry did; and if there are, would they really be Democrats with a Democrat administration in place? Besides, who would be so evil and stupid to publicly enjoy the pain of good Americans? Well, actually I know people both evil enough and stupid enough to do both.

Anyway, if Fox News swings it as if Harry is happy about unemployment, would people really believe it? If so, are people like that even capable of finding their way to the voting booth? Wouldn't they die of starvation due forgetting to eat? Doesn't natural selection do those fools in? I just find it ridiculous that Harry Reid has to address the subject, and state that he is not happy about high unemployment. What do you think?

Employment Situation

The data for February may have been influenced by several significant snow storms that battered the East Coast and Northeast, but the Bureau of Labor Statistics and I both agree that this is hard to measure on net. However, I want to add something, from some of my own personal experience and knowledge. The BLS notes that an employee would have to miss an entire pay period in order to miss the monthly count for employment, and that a good number of employees are paid semi-monthly or monthly. However, there was a significant dip in Construction employment in February, and these guys are often paid weekly, and due to union intervention, might miss a full week due to a blizzard. So, what I mean to say is that the number might have been a lot better if not for weather. THAT SAID, weekly jobless claims stunk up the place in February, so we will give the BLS and the number the benefit of the doubt.

Nonfarm Payrolls, at -36K, beat Bloomberg's consensus estimate for a -50K change. Payrolls figures for January and December were revised to -26K (from -20K) and -109K (from -150K), a net +35K revision for the two months before February. This is relatively good news; Harry was right. Let's examine the details now.

Some found the fact that long-term unemployment counts declined heartening, but we point out an interesting observation. The Household Survey shows that folks unemployed for 27 weeks or more declined in February by 180K. This has been taken as good news, because it's a decrease, but we have argued in the past that it's more likely these folks are dropping out of the labor force and not counted at all. We found some anecdotal evidence to substantiate our claims too. If the long-term unemployed are finding work, then how come individuals unemployed for 15-26 weeks (+64K) and 5-14 weeks (+50K) are not? As you can see, both those segments saw increased unemployment counts, not decreased like the long-term group.

I think it's obvious that those unemployed longer are disappearing for a few reasons. I think they are disappearing from the insured unemployment count as their benefits expire without extension (due to missing the threshold date for an extension). Now, the group of folks out of work less than five weeks dropped by 260, but I suspect people who have not been unemployed long tend to find work faster than the ones who slip through. Some people simply handle adversity better or have good contacts to get another job swiftly after getting canned.

Looking at the business sectors, Construction led all losers with 64K jobs lost in February. That followed 77K industry jobs shed in January. Government job losses also hurt the economy, despite what you might expect given all the "stimulus" bills coming out of Washington arse and the census-related hiring underway. The fact remains that cities, states and other municipalities are cutting back payroll to make their budgets, something the federal government does not have to do. Also, the Post Office is falling apart, and is even considering delivering mail five days a week or even three in order to cut expenses to meet income. Some 18K jobs were shed on net by the public sector in February.

Leading the way in hiring, the temporary workers count increased another 47,500 in February, marking the third monthly increase. It's a good sign and it signals things to come. Shell-shocked companies go to the temporary pool first before becoming comfortable enough to invest in the long-term. Also, the temporary workforce pool is full of highly qualified people willing to work at low cost now.

Unemployment stayed put at 9.7% in February, but as you know, we have issue with this data. Besides the skewing of data provided by a birth/death rate adjustment that is inappropriate when jobs do not exist, the government also does not consider part-time workers who once worked full-time as unemployed. Well technically they are not, but they make a lot less money in their part-time jobs than they did when they worked full-time, and so the unemployment rate does not offer one-for-one impact to consumer spending realities. That's why people are so aggressively seeking bargains, driving market share gains at Sears (Nasdaq: SHLD), Wal-mart (NYSE: WMT), Costco (Nasdaq: COST) and Target (NYSE: TGT), a.k.a. the discounters.

Now let's see how underemployment looks; that's the figure that includes part-timers, who once worked full-time, in the unemployed count. This adjustment also adds back "discouraged" and marginally attached workers, who are not counted as part of the workforce or unemployed. If we add back the 2.5 million displaced workers to the labor market, and include the 8.8 million underemployed part-timers in the unemployed count, adjusted unemployment reaches ((14.9M + 2.5M + 8.8M) / (153.512M + 2.5M)) * 100 = 16.8%. That's up from 16.4%, based on January's initially reported data.

However you look at it, the employment situation is still an unhealthy one, without question. I continue to believe that because of the depth of this recession and the degree of joblessness that has ensued, our economy is destined for a slow drawn out recovery that may include a quarter or two of contraction over the next year.

This article should interest shareholders of Robert Half International (NYSE: RHI), Manpower (NYSE: MAN), Korn Ferry Int'l (NYSE: KFY), Monster World Wide (NYSE: MWW), General Employment Enterprises (NYSE: JOB), Global Employment Holdings (OTC: GEYH.PK), Career Education (Nasdaq: CECO) and 51job Inc. (Nasdaq: JOBS).


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