08 March 2013

Today's Non-Farm Payrolls Report - The Good News, Bad News - Unadjusted Unemployment at 13%

Today's Non-Farm Payrolls report was encouraging despite the downward revision from last month's headline grabbing number, which in part helped make up today's headline grabbing number.

The seasonality adjustment used in this number was out of the normal bounds from past seasonality adjustments. And as one might have anticipated, the Birth Death model added its customary large number of estimated (imaginary) jobs into the mix.

As you know I prefer to look at the trends, rather than the month to month numbers which can be used to manage perception in the market and the public.

The overall trend shows that the US is not faring as badly as if it might have, at least in the short term, under an austerity regime such as that being followed in Europe.

The most encouraging statistics are the steady although somewhat anemic jobs growth, and the upturn, finally, in average pay. I could not find current median pay numbers in a chart, and this is what is most interesting to me as you know.

The Labor Participation Rate continues its decline.  It is a much more significant number than the 'headline' unemployment rate which fluctuates in whom it decides to count as employment-seeking.  

According to Bloomberg if the Labor Participation Rate was maintained as steady from before the financial collapse, and 'discouraged workers were not eliminated, the current unemployment rate in the US would be a little north of 13%.  But as workers get discouraged the government stops counting them as employment seeking, and the Labor Participation Rate falls.

And finally there is Real Disposable Personal Income Per Capita, which is as close to median as I could get.  And just for comparison, a chart showing Total Personal Disposable Income from 1921 to 1939, including the secondary recession of 1937 which was due to a policy error in premature Fed tightening from a fear of inflation. 

I think we learned in the 1930's that austerity after a credit bubble induced financial collapse is a destabilizing influence on civil governments.  Or at least that was the case in much of the world back then.  We seem to have forgotten quite a few lessons from history about regulation, reform, and the consequences of extremes in wealth inequality.

There is little doubt that if the nascent recovery falters, the 'sequester' will be blamed, and not the lack of reform and safeguards in the financial sector which caused the most recent financial crisis in the first place, although it was most certainly a key player in the tech bubble and collapse as well. 

One can only speculate that if genuine reform, including restraints on rampant deregulation, had been enacted after the stock market excess of the Tech Bubble, would the people and the world have been spared the Financial Collapse of 2008?  And what is yet to come, most likely out of Europe or China?