This “Jobs Friday” ritual is getting truly absurd. So it can’t be repeated often enough: These artifacts of the BLS’ seasonally maladjusted, trend-cycle modeled, heavily imputed, endlessly crafted and five times revised “jobs” numbers have precious little to do with the real health of the main street economy.
Indeed, the six-year run of job gains since early 2010 primarily represents “born-again jobs” and part-time gigs. In economic terms, they do not remotely resemble your grandfather’s industrial era economy when a “job” lasted 40 to 50 hours per week all year round; and most of what the BLS survey counted as “jobs” paid a living wage.
Not now. Not even close.
The Wall Street fools who bought the dip still another time on Friday do not have the slightest clue that the US jobs market is actually quite dead.
The chart below is also generated by the BLS but it measures actual labor hours employed, not job slots. It self-evidently puts the lie to the establishment survey fiction upon which the robo-machines and day traders are so slavishly focussed.
The fact is, labor hour inputs utilized by the US nonfarm business economy have “grown” at the microscopic annualized rate of 0.08% since the turn of the century. That’s as close as you can get to zero even by the standards of sell-side hair splitters, and it compares to a 2.02% CAGR during the 17 years period to Q3 2000.
So let’s see. Prior to the era of full frontal money printing, labor utilization grew 25X faster than it has since the turn of the century. Yet the casino gamblers bought Friday’s more of the same jobs report hand-over-fist—-apparently on the premise that this giant monetary fraud is actually working.
Not a chance. The contrast between the two periods shown in the chart could not be more dramatic. Nor do these contrasting trends encompass a mere short-term aberration. The death of the US jobs market has been underway for a decade and one-half!
Even in the establishment survey itself, the evidence of a failing jobs market is there if you separate the gigs and the low-end service jobs from the categories which represent more traditional full-pay, full-time employment.
The latter includes energy and mining, construction, manufacturing, the white collar professions like architects, accountants and lawyers and the finance, insurance and real estate sectors. It also includes designers and engineers, information technology, transportation and warehousing and about 11 million full-time government employees outside of the education sector.
We have labeled this as the “breadwinner economy” because the work week averages just under 40 hours in these categories and annualized pay rates average just under $50k. These kinds of family supporting jobs were what the Labor Department bureaucrats had in mind back in the 1930s and 1940s when the current employment surveys and reports were originally fashioned.
Notwithstanding all of the present era crafting, however, even the BLS establishment survey figures leave no doubt about the retreat of breadwinner jobs. At the peak in January 2001 there were 72.7 million of these genuine “jobs”, but that figure has never been seen again in this century!
In fact, after 95 Jobs Friday’s the count is still 1.3 million below the interim peak of December 2007 and 3% below the turn of the century level.
As a statistical matter, these 70.66 million breadwinner jobs account for just under 50% of the establishment survey’s 142.9 million jobs reported for November. By contrast, they account for upwards of 75% of total wages and salaries paid.
Needless to say, the stagnation of the breadwinner jobs market is the reason that wage and salary income growth has been so anemic. For more than 15 years the jobs mix has been steadily deteriorating, dragging the average annual earnings down with it.
Thus, since the year 2000 the number of jobs in what we have termed the Part-Time Economy has steadily increased. But these jobs in retail, bars, restaurants, hotels, amusement parks, stadiums and temp agencies average less than 30 hours per week and generate annual pay of less than $20,000. From an economic viewpoint, they are gigs, not jobs.
The same can be said for the balance of the establishment survey—-or what we have called the HES Complex (health, education and social services). While these jobs average about $35k of annual compensation, that figure is heavily skewed by a small number of highly paid health and education professionals such as doctors and administrators.
The overwhelming number of jobs in the HES Complex, in fact, pay well less than $30,000 per year.
At the end of the day growth in real wealth and living standards requires expansion of full-time employment and rising productivity per employee. The hard truth is that the debt-saturated US economy is not producing either of these essential ingredients of real main street prosperity.
Another angle on what can be described as the “atomization of work” is evident in the detailed breakout of wage and salary income that is published annually by the social security administration. This data on payroll earnings by annual income bracket is about as close to an honest measure of the US jobs market as you can find.
That’s because they are based not on surveys, estimates, imputations and models like the BLS figures, but reflect actual individual payroll records. It goes without saying that no employer sends withholding taxes to the IRS based on phantom jobs slots.
Here’s the thing. Last year 158.2 million US workers had payroll records and withholding taxes and earned $7.1 trillion in compensation. Yet nearly 49 million or 31% if these workers earned less than $15,000 per year.
In fact, this massive cohort of part-timers and gig based workers generated only $300 billion of wages or only 4% of the national total. On average they earned just $6,200 during the entire year.
What Jobs Friday is about, therefore, is the cycling up-and-down of part-time jobs and gigs on the margins of the economy. These undulations occur in the intervals between the serial financial market booms and busts which result from Fed policy. Without so much as a fleeting acknowledgement, bubblevision indulges in the farce of counting slots mainly in the bottom 49 million of payroll records.
In fact, virtually all of the change in the BLS job count occurs among the bottom 91 million payroll records reported by the social security administration. During 2014 these workers all earned under $35,000 per year, with an average of just $14,600.
That’s right. The bottom 58% of the work force earned less than 20% of reported wage and salary income, and clearly worked exceedingly limited hours.
Either that or the IRS is collecting taxes from employers who wantonly violate the minimum wage laws since the average wage for the bottom 81 million workers computes to $6.30 per hour on a standard work year!
In contrast to zero growth in hours worked in the total business sector, and a 0.4% annual growth in the BLS’ measure of full-time employment since the turn of the century, the ultimate category of gigs and episodic work——waiters and bartenders——has grown at a 1.9% annual rate.
Accordingly, these categories accounted for 30% of all the “jobs” created in the American economy since the turn of the century, as reported in the BLS monthly establishment survey.
Call it the “Bread and Circuses” economy. The picture below is essentially what the talking heads work themselves into a bullish tizzy about. That is, until the next financial bubble bursts owing to a purportedly one-time accident or contagion that will never ever be repeated .
It goes without saying that goods production remains essential to wealth creation. Humanity has not yet been put in cocoons, nor would an economy work if everyone simply hired their neighbor to cook their meals, mow the lawn, clean the house, do the laundry and fix their electronic gadgets. Even Uber drivers need someone to manufacture their vehicles first.
Yet goods production—-mining, energy extraction, manufacturing and construction—continues to sink. There are still 2.4 million fewer jobs in the goods producing economy than there were at the pre-crisis peak in December 2007 and 20% fewer jobs in this foundation sector of the economy than in January 2000.
Likewise, there has been a decline or no gain since the turn of the century in numerous other higher paying full time job categories. Friday’s job report, for example, posted 5.9 million jobs in wholesale distribution, which is the identical number recorded in November 2000.
For the six breadwinner categories shown in the graph below, there were a cumulative 11.7 million jobs reported for November compared to 13.4 million in November 2000. That’s a 13% shrinkage.
Nor can these trends be accounted for by some explosion of productivity and technology. That is, the idea that robots and driverless cars are displacing human labor at an accelerating rate.
Since the job market bottomed in early 2010, nonfarm productivity growth has decelerated sharply, averaging just 0.5% per annum. That is less than one-fourth of its historic rate.
In short, the current so-called business expansion is already long in the tooth at 79 months of age and the next recession is just around the corner.
Since the November jobs report was just more of the same there is not a chance that the structural deterioration of the jobs market outlined above will be reversed before the current massive financial bubble bursts.
Accordingly, there could not be a better time than now to hit the button Cramer rarely uses—- and sell, sell, sell.