Jobs Friday----When Bubblevision Misses The Epic Failure Of The US Labor Market

CNBC's long-running "jobs Friday" fetish is getting downright appalling.  Each month the BLS puts out a treasure trove of data on the rich and complex mosaic of the US labor market----a download that embodies a truly frightening trend of economic failure.

Yet the talking heads who assemble in its screen boxes to opine on Hampton Pearson's 30-second summary of the BLS release never have a clue. In their allotted 15 seconds of fame, they merely bloviate about the single dumbed-down number----the establishment survey jobs print---that is the sum and substance of the coverage.

Trained seals would be just as effective: ort! ort! ort!

In any event, within seconds the SPX futures are off to the races, flashing the trading algos' instant take on what the "print"  means for one thing alone. Namely, does it portend continued or even more ease at the Fed and a plentitude of juice for Wall Street speculators.

Last Friday CNBC inadvertently indicted it own pandering when the winner of its "pick the number" contest hit 142,000 jobs right on the head, making a mockery of the 200-250k consensus range that had issued from the "experts". The winning viewer's name was Ronnie Squires, who described himself as "retired" and the owner of a (very) small business through which he occasionally transports unwanted cats and dogs in his pick-up to new out-of-state "homes" for friends. Along the way, he does his own jobs survey:

"I do a lot of traveling around the country and there's still a lot of folks who say 'there's no jobs out there'.

I watch [CNBC] every day and I just don't see it.

I don't know if the people on Wall Street are not really getting out and seeing what's really going on [in America].

When you go to small towns, like I do, and talk to people - people don't have much confidence in the numbers you hear."

In a few deft seconds, a "no jobs" nobody who apparently doesn't actually have one himself,  essentially explained the contents of the chart below to his silenced CNBC hosts. Over the course of 170 "jobs Fridays" since mid-2000, the latter have apparently never noticed the single most stunning fact embedded in the monthly BLS report. Namely, that outside of health and education there has not been one net new job created in the American economy since July 2000! Yes, not a single new job---as in none, nein, nichts, nada, zip!

Nonfarm Payrolls Less HEX Complex - Click to enlarge

Nonfarm Payrolls Less HEX Complex - Click to enlarge

Yes, we do have about 7.3 million more teachers, nurses, home health aides and bed-pan changers----meaning that the total job count in what I have termed the HES Complex (health, education and social services) now stands at 31.7 million compared to 24.4 million in early 2000 (see below). Moreover, since all work is noble----that applies not the least to the labors of those who educate our children and care for the sick.

The point here, however, is about economics, not social worth. And in the realm of economics, the notion implicit in "jobs Friday"----that all jobs are created equal----is simply a fatuous shibboleth. 

In fact, the 107 million non-HES Complex jobs shown above can be divided into two categories-----part time jobs and breadwinner jobs.  Compared to breadwinner jobs which pay about $50,000 per year, the former pay at a rate of about $20,000 annualized, reflecting around 26 hours of work per week and hourly pay of about $14.

Stated differently, the bartender, waiter, bellhop, maid, shoe repair, retail clerk and temp positions reflected in the graph below represent 40% jobs from an economic value perspective. And from a societal angle, they provide no foundation whatsoever on which to support middle-class families and a thriving citizenry.

Part Time Economy Jobs - Click to enlarge

Part Time Economy Jobs - Click to enlarge

By contrast, breadwinner jobs in manufacturing, mining, construction, FIRE, transportation and distribution, information technology, the white collar professions and business management do generate the means for at least a minimum standard of living. Unfortunately, the graph below shows an awful truth that Steve Leisman and Mark Zandi, the Keynesian statist from Moody's Economics, have never noticed. Namely, that the US economy has been losing breadwinner jobs at a rate of 18,000 per month for 14 years running.

Breadwinner Economy Jobs- Click to enlarge

Breadwinner Economy Jobs- Click to enlarge

Taken together, these two charts leave nothing to the imagination. Since Bill Clinton's last month in office there has been a 3 million or 5% shrinkage of breadwinner jobs. There is nothing like this in modern history, yet the Jobs Friday revelers have always been oblivious to that economically debilitating trend---a harsh reality which massively dwarfs the seasonally maladjusted, continuously revised, heavily imputed and guesstimated monthly noise that is the essence of Hampton Pearson's summary.

Even when you look at the growth in part-time jobs outside the HES-Complex, the pattern has been volatile and tepid on a trend basis. During the "recovery" since the Great Recession ended in June 2009, for example, most of the gain has consisted of "born again jobs". That is, two-thirds of the 3.7 million part-time job gains reported since June 2009 were first generated during the Greenspan housing bubble. Needless to say, they were then wiped-out during the Great Recession plunge---- only to be slowly recouped in the 61 months since then as "born again" jobs represented as new hires.

Stated differently, Bernanke boasted in February 2004 that the US economy had entered a period he was pleased to term "The Great Moderation". But it didn't exactly work out that way---since just four years later he claimed the nation's economy stood at the gates of the Great Depression 2.0.

Bernanke's lack of clairvoyance, however, is not the point here. At least by the lights of the monetary central planners in the Eccles Building, the 14 year since the turn of the century were certainly intended to represent a great moderation. That's why twice during that period they flooded the financial markets with unprecedented liquidity-----a maneuver designed to flatten the cyclical bottom and ignite the rebound.

Yet what did it do for the non-HES labor market?  It did not arrest the trend decline in breadwinner jobs in the slightest. And even in that bleak corner of the economy that I have labeled the part time economy there has been a net gain of just 21,000 per month over the past 14 and one-half years.

That bears repetition. During a decade and one-half, the US economy has managed to generate only 21,000 part-time jobs per month outside the HES Complex. So it might well be well and truly wondered how these people keep putting on their party hats month-after-month.

In the first place, even if you believe that prosperity can be sustained by the vaunted "shop until they drop" American consumer, the pattern shown above doesn't get the job done by a long shot. The periodic rebirth of a modest quotient of part-time positions paying $20k per year will support robust consumption spending in the current GDP reports only at the expense of ballooning credit losses and over-time work for the repo man down the road.

Apart from this obvious non-starter, there are three specific facets of the American economy's complete dependence on the HES Complex for job growth that are deeply troubling, but have perennially escaped the notice of the Jobs Friday commentariat.

First, nearly all of these jobs are "fiscally dependent" owing to direct government spending, loans and tax expenditures. At present, total government expenditures for Medicare and Medicaid, for example, amount to $1.2 trillion annually and account for well-more than 50% of health service delivery, but upwards of 90% in some areas that are jobs intensive. The 3.3 million jobs in nursing facilities, for example, are almost completely funded by Medicare and Medicaid.

Likewise, the number of home health care jobs has soared by 700k and nearly doubled since the year 2000, but this sector is also heavily dependent upon the two big government programs. At the same time, the tax expenditure each year for employer-based health coverage and individual tax credits and deductions is upwards of $200 billion, meaning absent these underlying fiscal subventions---- health care expenditures and employment gains would be far lower.

Even in the education sector where 13.6 million jobs were reported for August compared to 11.6 million in January 2000, 75% of this pick-up was in higher education, not K-12; and it goes without saying that the boom in higher education is the direct result of $1.2 trillion in student loans and $40 billion annually in direct grant programs financed entirely by Uncle Sam.

On the margin, all of this fabulous fiscal support for the HES Complex consists of borrowed money----since if there actually were a balanced budget law that required today's taxpayers to foot the cost of government rather than the unborn taxpayers of tomorrow, the first thing to be cut would be the giant subsidies being collected by the health and education cartels. In any event, governments are now bumping up against "peak debt", meaning that the stupendous flow of fiscal resources to the HES Complex is beginning to abate sharply, resulting in a unmistakable slowing in the rate of so-called job creation.

During the Greenspan Boom between 2000 and 2007, for example, the monthly rate of job  creation in the HES Complex was 51,000. During the Great Recession that slowed to 43,000 per month; and during the 61 months of recovery since then it has dropped further to just 28,000 per month. In short, the American jobs machine----tentative as it has been for the past 14 years----has essentially rested on a fiscal mirage that is now reaching it waning days.

The second disability follows---namely, that HES Complex job growth has nothing to do with monetary policy. There is no way, shape or form by which the Yellen Fed's focus on the labor market, and its determination to keep the lunacy of zero interest  in place for what will be 78 month running through mid-2015, actually stimulates activity rates and jobs in the HES Complex.

Overwhelmingly, the hospitals, doctors offices, outpatient clinics, nursing homes, for profit higher ed diploma mills and just plain old public education system do not borrow large amounts of money to operate. They do not care whether the money market interest rate is zero or 5%.

The credit market transmission mechanism for Fed policy is over and done, anyway, because the household sector has reached peak debt, as shown below.  But the obvious point is that the HES Complex was never dependent upon cheap interest rates and booming debt creation in the first place. It was about fiscal transfers all along.

Household Leverage Ratio - Click to enlarge

Household Leverage Ratio - Click to enlarge

In short, the Fed has managed to grow it balance sheet from $500 billion to $4.4 trillion during the period encompassed by the charts above----and the overwhelming Keynesian rationale has been saving and creating jobs.  Yet the only net jobs created in the US economy during this period had absolutely nothing to do with this manic spree of money printing. Would that one of Janet Yellen's vaunted "dashboards" carried a reminder to that effect.

Finally, there is the issue of productity and paying our bills as a nation.  We import about $2.5 trillion per year. That giant inflow of consumer products, capital goods and raw materials has to be paid for out of exports of goods and services--- or the shortfall must be borrowed from the rest of the world.

The Keynesian money printers, of course, counsel not to worry, because foreigners are eager lenders to an American nation that has lived beyond its means for 30 years. According to Greenspan, Bernanke, and any random Wall Street economist you might happen to choose, the peasants of Asia who have come out of the rice paddies to earn a meager living in the slave factories of east China have an irrational penchant to over-save and thereby accommodate the $12 trillion debt of the US household sector.

Needless to say, that's a fairy tale. Sooner or later, the American economy will be forced to import only what its earns in foreign sales and services because the export of excess dollars and debt by the Federal Reserve will be brought to a halt as the race to the bottom among global central banks enters its final phases. Stated differently, the Asian mercantilist exporters to not "save" too much; they furiously peg and print their own currencies in order to absorb the tsunami of dollars the Fed sends their way.

In this context, there has self-evidently been no recovery in goods production. As of last Friday's report, the number of jobs in construction, manufacturing and mining (including energy) had hardly budged from the recession bottom and was down nearly 25% from the level of January 2000.

Goods Producing Jobs - Click to enlarge

Goods Producing Jobs - Click to enlarge

So at the end of the day, the HES Complex does not help the US economy pay its way. Essentially, America has been creating jobs only by borrowing from the rest of the world-----more than $10 trillion on a balance of trade basis during the last 30 years.

And most certainly, this is a structural barrier to real economic growth and job creation that the revelers on Jobs Friday have never even remotely bothered to note.

HES Complex Jobs- Click to enlarge

HES Complex Jobs- Click to enlarge

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