Payrolls declined by 20.000 in April, lower than expected (-100.000). However, looking just below the surface of the headline data reveals a fast deterioration in other job measures.
The number of people employed part-time for economic reasons, i.e. those that could not find full-time jobs or had to work part-time because business was slow, swelled sharply by 306.000 in April to a total of 5.22 million. This is the highest number since 1994 (see chart below, click to enlarge).
Number of people employed part-time for economic reasons (chart: BLS)Such part-time employment now accounts for 4.52% of all private jobs, the highest percentage in 13 years and up from 3.4% two years ago (see chart below).
The Bureau of Labor Statistics counts everyone who worked 1 to 34 hours per week as employed and includes them in the headline payroll numbers, even though such employment clearly results in fewer hours and lower pay.Taking this analysis one step further, part-time employment for economic reasons, i.e. forced part-time, accounts for 21% of all part-time jobs. This is also the highest level since 1994.
In summary, while the headline employment numbers are not declining as fast as during previous slowdowns, the qualitative job measures are worsening and are already at multi-year points.The most likely cause is that employers, particularly those in the service sectors, are hoping the economy will rebound soon, so instead of fully laying off people they are cutting costs by forcing employees to work less, for less pay, i.e. forcing them into part-time un-employment.
What does this mean for the economy? Let's combine the poor employment picture with sharply higher costs for necessities such as food and fuel, the zero/negative saving rate and record high debt: the result is most likely going to be a continuing curtailment of discretionary personal spending. With personal consumption accounting for nearly three quarters of GDP, I believe we are in for a prolonged period of weakness.
Looking at just the headline BLS numbers is currently pretty misleading and may cause misplaced optimism.
Nice post, but you still haven't told us under what condition you will accept your 'peak oil' hypothesis to be wrong.
ReplyDeleteI have seen 'peak oilers' and 'global warming' supporters, who accept anything as support of their theory. In the context of global warming, whether it is too hot in the summer, too cold in the winter, too many hurricanes or too few, they can all be explained by global warming.
Cooking the books
ReplyDeleteWe lost 20000 jobs but the unemployment rate was DOWN 0.1% from the previous month. How is this possible? If we had less jobs that means unemployment goes up, not down. I don't fully understand, but it seems to me somebody is cooking the books.
"...under what condition you will accept your 'peak oil' hypothesis to be wrong"
ReplyDeleteExxon's output declined 10% since last year despite record prices. Russia's output (Lukoil) has been declining as well. I know, it's the fault of the speculator's, the liberals, the terrorists, oil companies witholding production, Bush/Cheney/government, the Arabs, evil dictators or the Easter Bunny. It most certainly has nothing to do with the scarcity of oil.
Hel,
ReplyDeleteThe market-ticker guy said that the BLS included 250,000 jobs from the birth-death model and without those phantom jobs the loss would have been much higher.
M3ANON,
My answer to your question about global warming isn't nearly as clever as rj's but it may be more informative, you can judge for yourself. It's on yesterday's thread.
Yoski,
ReplyDeleteIf production falls so fast and demand grows due to booming India/China or even stays flat, there is no way crude price can fall from here, right?
So, let me ask you the same question that Hell avoids to reply to - at what crude price will you accept your peak oil hypothesis to be wrong?
Respectfully,
G.
With respect to consumer discretionary, factor in the declining MEW - YoY for the first quarter was down more than 70% - along with the factors you mentioned it is not a pretty picture.
ReplyDeleteAlso, the B/D adjustment was over 250K added jobs - the recently reported months were revised downward, again - odds on downward revisions for this report?
G,
ReplyDeleteFalling prices with globally expanding economies would be indicative that peak oil had not occurred...if demand cratered faster than production, you could see falling prices in a peak oil scenario. Timeframe, over a year or so IMNSHO.
Also, a speculative commodity price bubble ATM has to be considered, the hallmarks of which would be rapidly expanding inventories as producers held back supplies anticipating better prices in the future until the bubble burst and a price crash ensued.
Longer term trends are the real story in evaluating a peak, one indicator of which may be IOC reserve and production replacement rates (the super majors).
Greenie,
ReplyDelete"... at what crude price will you accept your peak oil hypothesis to be wrong?"
Peak oil is a mathematical fact. It's not even up for debate. Think Calculus, finite area under a curve, maximum. You can not produce ever increasing amounts of a finite resource, mathematically impossible. The only part of peak oil that is up for debate is its exact timing. Somewhere between 2005 and 20 years from now.
Hel,
ReplyDeleteDo you have an opinion on the idea that banks using the TAF have exhausted all their conforming paper and now the Fed is being forced to accept non-conforming paper as collateral or allow said banks to go belly up.
Also what is your take on non-borrowed reserves being neg$90B.
"The only part of peak oil that is up for debate is its exact timing. Somewhere between 2005 and 20 years from now."
ReplyDeletePeak global population was also a mathematical fact for Malthus. Of course he got the timing wrong, but we can forgive him for such triviality.
Besides empolyers decreasing full time employees to part time, it could be that some folks have ran out of unemployment benefits (therefore aren't included as unemployed anymore)and had to take part time jobs for rent money.
ReplyDeleteGreenie-
I left a question for you in yesterday's comments too.
dink said:
ReplyDelete"So how do you think this all turns out? The various hoaxes are revealed and the economy acts likes it 1998 for the next few decades?"
Deflationary recession/depression for 8-10 years is what I see ahead. There will be many problems, but shortage of oil (or copper or tin) is not one of them.
I'm having a hard time with this round of "peak oil". I heard this same song before during the Carter administration when I was in engineering school. The fear was that we only had 20 years of reserves left. Yikes! Horrors!
ReplyDeleteWell, one of our professors assigned the task of plotting the reserves available for the previous 50 years ... and yes, it averaged about a 20 year supply.
Moral - it is uneconomical to look for oil when a 20 or 30 year supply is already on the books. When the reserves dwindle and the prices rise, exploration cranks up for the next wave of discoveries.
I don't doubt that the next round of oil will be more expensive than the last, but not outrageously so. I also remember how the price dropped to 12/bbl in the early 80's after the painful peaks of the 70's. Sadly, this glut was the shock that set back solar power about 25 years.
Hopefully, we will be smarter this cycle and not lose the progress we are making in solar and wind generation in this oil price cycle.
I have to agree with Greenie's reference to Malthus. The fear that we are past the peak and that the sky is falling denies the opportunity that technology may actually solve some of these very real and pressing problems.
***That Kazilar link tried to download a virus. My software caught it and let me stop it in time. Be careful all***
ReplyDeleteRe: Unemployment. I once read that 40% of California's employment boom was specifically related to the real estate bubble. A lot of those jobs were self-employment (RE agents, mortgage brokers, general contractors,landscapers, and their "support" such as hair stylists and dog masseuses) so their job loss won't show up in the numbers since they don't qualify for unemployment insurance.
Yoyomo-
"to accept non-conforming paper"
When even the conforming paper was skeezy.
Greenie-
"There will be many problems"
Elaborate?
Last anon-
"Hopefully, we will be smarter this cycle"
We're never smarter than we absolutely have to be.
The only way Peak Oil isn't an incontrovertible fact is if one believes in the Abiotic Oil thesis. In short, the central idea of Abiotic Oil is one where the world's black gold gushes up from the earth's core in an endless regenerative stream, created as the result of mysterious processes deep within the core of the earth or some such piffle.
ReplyDeleteIn the meantime, Bill Engdahl thinks oil prices are sky high due to the manipulations of certain powerful market participants. Could well be, but Peak Oil is still real despite the jiggery pokery of major market cads as Goldman Sachs.
http://www.financialsense.com/editorials/engdahl/2008/0502.html
As for the jobs numbers, we are deep into the land of "lies, damned lies and statistics". Between the birth/death and seasonal models, hedonic adjustments and other stupefying metrics used by the BLS, there is nary a sliver ofm truth on offer from officialdom.
For a while, this may cloak the presence of the two surly 800 pound gorillas last seen hovering in the none too large room that is the U.S. economy, but
not for too long as Hell's post suggests.
energyecon,
ReplyDeleteproducers can also hold production below capacity, i.e. production management can prevent an evident build in stocks though there's always a tension here as each also desires to maximize its gain.
on the price side, discovery takes place in financial markets where, so far as crudes, less than five percent of contracts are physically settled.
the fact that prices for benchmark crudes are discovered in the futures markets might call into question how efficient these are when very large amounts of, primarily long only, money began flowing into commodities from early 2004. In this case a reallocation by index funds seeking higher returns and, to a degree, being able to create what they sought since they are exempt from normal position limits.
From an end March '08 article by Gene Epstein:
'Index funds offer investors an easy, inexpensive way to gain exposure to a segment of the commodities markets or a broad-based basket of commodities. Result: The funds have drawn many private investors who have never ventured into futures, along with pension funds and other institutional players looking to diversify. But for all the virtues that the funds hold as a way of spreading bets across commodity markets, they take only long, or bullish, positions, avoiding short-selling. In other words, they trade on the naïve and potentially fatal assumption that commodities have the same tendency as stocks to rise over the long run.
IT'S NOT EASY TO SIZE UP THE influence of the index funds. But based on their known cash commitments in certain commodities, and the commodity indexes their prospectuses say they track, it is possible to estimate the size of their commitments in all commodities they buy. Using this method, analyst Briese (pronounced "breezy") estimates that the index funds hold about $211 billion worth of bets on the buy side in U.S. markets.
Applying a similar method, but with slightly different assumptions for indexes tracked, Bianco Research analyst Greg Blaha puts that figure at $194 billion. Either figure is enough to turn the index funds into the behemoths of the commodity pits, where total bullish positions now stand at $568 billion.
That this large, bullishly oriented group of funds is flourishing is partly a result of a regulatory anomaly. In recognition of the fact that the commodity markets are too small to absorb an excess of speculative dollars, the Commodity Futures Trading Commission, in conjunction with exchanges, imposes position limits on speculators. But the agency has effectively exempted the index funds from position limits.
Nearly $9 out of every $10 of index-fund money is not traded directly on the commodity exchanges, but instead goes through dealers that belong to the International Swaps and Derivatives Association (ISDA). These swaps dealers lay off their speculative risk on the organized commodity markets, while effectively serving as market makers for the index funds. By using the ISDA as a conduit, the index funds get an exemption from position limits that are normally imposed on any other speculator, including the $1 in every $10 of index-fund money that does not go through the swaps dealers.
The purpose of position limits on speculators, which date back to 1936, is clearly stated in the rules: It's to protect these relatively small markets from price distortions. An exemption is offered only to "bona fide hedgers" (not to be confused with "hedge funds"), who take offsetting positions in the physical commodity.
The basic argument put forward by the CFTC for exempting swaps dealers is that they, too, are offsetting other positions — those taken with the index funds.'
See: http://commitmentsoftraders.org/?p=32#more-32
And here is the CFTC's supplemental which, while restricted to ag commodities, gives a good idea of index traders position v. others:
http://www.cftc.gov/dea/options/
deaviewcit.htm
Many More Are Jobless Than Are Unemployed
ReplyDeleteBy FLOYD NORRIS
Published: April 12, 2008
THE unemployment rate is low. The jobless rate is high.
[...]
In the latest report, for March, the Labor Department reported the jobless rate — also called the “not employed rate” by some — at 13.1 percent for men in the prime age group. Only once during a post-World War II recession did the rate ever get that high. It hit 13.3 percent in June 1982, the 12th month of the brutal 1981-82 recession, and continued to rise from there.
To be sure, employment is a lagging economic indicator, and rates higher than this have prevailed after recessions ended. But this rate has arrived at a time when the government still hopes that a recession can be averted.
http://www.nytimes.com/2008/
04/12/business/12charts.html?_r=2&oref=slogin&oref=slogin
Malthusian followers can be extremely dangerous to the society.
ReplyDelete"Malthus's position as professor at the British East India Company training college, which he held until his death in 1834, gave his theories considerable influence over Britain's administration of India through most of the 19th century, continuing even under the Raj after the Company's dissolution in 1858. In a major result of this influence, the official response to India's periodic famines (which had occurred every decade or two for centuries) became one of not entirely benign neglect: the authorities regarded the famines as necessary to keep the "excess" population in check. In some cases administrators even banned private efforts to transport food into famine-stricken areas."
Greenie,
ReplyDeleteThe whole purpose of Malthusian philosophy is to prevent population growth from leading to famine. If the planet's limitations were acknowledged and adequate birth control incentives offered, there would be no need for Soylent Green solutions.
You have the ability to get psp games, no matter how old or new. They also make sure to give you the right software and detailed directions on how to download and transfer your games to PSP. I was really lucky I was able to find them.
ReplyDelete