“The Economy may stink, but the market doesn’t care.”
“Why Jobs Outlook Just Got A Whole Lot Worse.”
This is the headline and subtopic list from today’s edition of CNBC.com. Kudos to the editor, John Carney and senior writer, Jeff Cox for this memorable piece of hype and fear mongering. It is a response to this morning’s release by ADP and Moody’s Analytics of their private payroll survey for March, which obviously missed street expectations (the number was 119,000, expectations 155,000). To add to the depressing headlines above, the article went on to assert that “GDP growth is in the midst of its longest sub-3% growth period since 1929” (how evocative of the good old days). The piece also stated “this is the worst economy in 83 years.”
This stuff is really beyond the pale and they should be embarrassed for putting it in print.
Before I really tell you what I think about the article, let me say a few words about unemployment. Although what I am about to propose, vis a vis the macro jobless statistics, will seem to marginalize the effect on the economy and market of unemployment, being unemployed is not a marginal issue. I am seriously aware of the plight of those who want to work and cannot find a job. It is an awful situation. But to trade on peoples fears to sell a product or forward an agenda by overstating a negative impact of unemployment is unforgivable. This is unforgivable because it tends undermine the confidence of those who might be in a position to build that new plant or offer a new job. This type of journalism exacerbates the problem.
Here is a little perspective:
- According to the Bureau of Labor Statistics, since October of 2010, the United States has experience sequential monthly growth in non-farm employment. We have added over 2 million jobs in that period (we may have added another 400,000+ in the first quarter of 2013, subject to adjustment).
- In the last three decades, the peak unemployment rate occurred, not in 2009 (at the height of the “Great Recession”), but in November of 1982 in the second year of Ronald Reagan’s first term. The rate peaked at 10.8%. The peak unemployment rate during the first term of the Obama administration was 10% (revised down from 10.2%). FYI, the peak unemployment rate in the “last 83 years” occurred during the “Great Depression” and it was 25%.
- One other item I should address in the interest of giving perspective is the “labor Force Participation Rate.” This will probably be a topic as future employment stats are issued. It is the percent of the total population above a certain age to a retirement age (normally 65) that is currently employed. That number currently stands at 63.3%, the lowest level since 1979. Importantly, in the U.S. there is no upper limit or retirement age, ergo the retired are included in the number as potentially employable, thus understating the rate. Even though many attribute this low number as a signal that lot of people have just “given up the ghost,” stopped looking. To bring people in off the ledge I would say that the primary issue is really demographic, maybe having to do with the ‘pig in the python’ phenomenon of the “Baby Boomers” passing into retirement. Taking a simple average of the 78 million boomers born over 18 years (1946-1964), gives you about 4.3 million per year (360,000 per month) that might retire. And this is just a simple average. The boom is front-end loaded. Just say you have 200,000 per month going into retirement. This is a huge headwind for the labor participation rate. For purposes of this discussion we probably should not be looking at the labor participation rate as a problem; but, rather how we will support this group of retirees with Social Security and Medicare. The silver lining is that for each one of us old codgers leaving the work force, a place may be made for someone to move up and a place may opened for a newbie, all of this to help pay those FICA and Medicare taxes.
Back to the point, for anyone to write that “the Economy Stinks”, “The Jobs Outlook Just Got a Whole Lot Worse” or the “this is the worst economy in 83 years,” well they just have to be making the stuff up. They have not done their homework; or, maybe they have some other agenda. This the irresponsible, fear inducing, counterproductive and the stuff that motivates me to write this blog.
What do you think?
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