U.S. January Jobs Report!

Last Friday’s U.S. job report which, as I’m sure you know has been ‘all over the news’, suggested that a net 243,000 U.S. jobs were created in January.  This report generally was greeted with great enthusiasm by the U.S. equity markets, U.S. economists, U.S. money managers, and pretty much any other U.S. category of ‘market watcher’.  At first blush the report is surprising to me on the positive side, but for a number of reasons I am at this point in time ‘a doubting Thomas’ ‘from Missouri’ with respect to how important a reflection of U.S. economic recovery it is when looked at closely. That said, I have listed a number of articles that reported on this news at the end of this commentary.

I spent time reviewing the Bureau of Labour February 3 News Release.  Some 42 pages long when printed, it is as you might imagine quite a difficult document to wade through. My comments on it are:

• the reported number of nonfarm payroll jobs is based on what is called “the establishment survey data”.  That survey data is interpolated across the whole of the U.S. population, and is presumed to be statistically valid.  I assume it is a statistically valid survey, but the result is after all a number based on a comparatively small sample.  It is also a monthly statistical report that frequently is subsequently adjusted;
• January 2012 saw household survey data reflect updated population estimates that were derived from the recently completed 2010 census. I have reviewed these adjustments as best I can.  Frankly, I can’t really make sense from the report as to precisely how these adjustments have affected the reported numbers. That is not to say that the report is inadequate, it more is a commentary on my own inabilities;
• six categories of job types account for 220,000, or 94%, of the 243,000 net jobs gain estimate. That 94% is broken down by category as follows: construction 9%, durable goods manufacturing 19%, education and health services 16%, and leisure and hospitality 19%, professional and business services 31%, and transportation and warehousing 6%;
• that 21,000 jobs were created in construction, and 44,000 jobs were created in durable goods manufacturing are both commendable numbers achievements. That transportation and warehousing created 13,000 jobs is interesting if it is reflected in more movement of goods. The other three survey categories which collectively added 150,000 new jobs are all service categories. As I have said in a number of these e-mails commentaries, I believe service jobs are not as important in the long term to a given country economy as are manufacturing jobs;
• importantly, as I read the January U.S. jobs report, ‘jobs’ include part-time jobs.  Also importantly as I see things are the average wage rates that these new jobs carry.  Finally, is the issue of the ‘permanence’ of these new jobs.  None of these things are addressed in the ‘raw number’ 243,000; and,
• it is said that America needs to create 125,000 new jobs every month simply to keep up with its population growth, and that it will be necessary for the American economy to create 243,000 new ‘net jobs’ each month for approximately the next five years for the U.S. to regain the employment level it ‘enjoyed’ at the end of 2007.  Even if that analysis is correct – and based on statistics I have reviewed it may well be – that still is an overview statistic as I understand it that does not account for the difference in the comparative number of part-time jobs or average labour rates included in the U.S. employment numbers at the end of 2007 versus those U.S. employment numbers as they are estimated going forward.

Because I found the January U.S. jobs report so surprising on the upside, I don’t think it can be disregarded completely.  Rather, I think the U.S. jobs reports and a careful analysis of them over the next few months will be of critical importance in the context of the U.S. economy viewed in isolation.  Simply put, for the time being at least, I am of the view the January Jobs report is more likely than not to prove to be anomalous.  I read the following articles prior to writing this commentary.  If I was going to read only one of them, I would read ‘Who Took My Easy Button’ – John Mauldin – reading time 5 minutes:

• ‘Messages from the January Employment Release: Accelerating Improvement For Now’ – Econbrowser Blog – reading time 5 minutes;
• ‘Job Growth a Blowout: 243,000 Added (sub-title: Unemployment rate drops to 8.35)’ – Fiscal Times – reading time 4 minutes;
• ‘Chart of the day: Labor force participation rate at 30-year low’ – CreditWritedowns Blog – reading time 4 minutes;
• ‘I Can’t Take It Anymore! When Will The Government Quit Putting Out Fraudulent Economic Statistics?’ – Economic Collapse Blog – reading time 5 minutes;
• ‘Forget the U.S. Unemployment Numbers: These Mean More (Eurozone numbers)’ – Profit Confidential – reading time 4 minutes;
• ‘Here’s The Truth About The Massive Million Plus Spike In People Not In The Labor Force’ – Business Insider – reading time 4 minutes;
• ‘Who Took My Easy Button’ – John Mauldin – reading time 5 minutes; and,
• ‘U.S. Department of Labor February 3 News Release’ – reading time, as much time as you want to spend.

Barclays PLC Compensation Cuts! 

A recent article reported rumors that Barclays PLC is planning to cut employee income by 25% to 30% on average from last year, and at the same time eliminate about 5% of its senior bankers. The article also reports that Citigroup Inc., Credit Suisse group AG, Deutsche Bank AG, and Morgan Stanley have either reduced or are planning …..continue reading. 

Commentary reading time 3 minutes.  Referenced article(s) reading time 4 minutes. This Commentary includes a suggestion that you speak with your Investment Advisor(s) with respect to its subject matter.

Do Cyprus Bank Downgrades Matter?

An article Thursday says that Fitch credit ratings have now downgraded the 3 largest banks in Cyprus from BBB minus 2B B+.  This is said to have reduced the indebtedness of those banks ‘junk status’. Does this really matter in the overall scheme of things, and will it contribute …..continue reading.                                     

Commentary reading time 1 minutes.  Referenced article(s) reading time 1 minute.

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