June Jobs Report
Hard to feel good about this report, as summarized by the WSJ this morning:
About the best we can say about yesterday’s June jobs report is that employment is usually a lagging economic indicator. At least we hope it is, because the loss of 467,000 jobs for the month is one more sign that the economy still hasn’t hit bottom despite months of epic fiscal and monetary reflation.
The report is in many ways even uglier than the headline numbers. Average hours worked per week dropped to 33, the lowest level in at least 40 years. This means that millions of full-time workers are being downgraded to part-time, as businesses slash labor costs to remain above water. Because people are working less, wages have fallen by 0.3% this year. Factories are operating at only 65% capacity, while the overall jobless rate hit 9.5%. Throw in discouraged workers who want full-time work, and the labor underutilization rate climbed to 16.5%.
But I am just as interested by Nasim Taleb’s appearance yesterday morning on CNBC. He makes the point (as usual, exaggerates the point) that a lot of economics reporting is statistical noise and a delta of 100,000 jobs, such as we had, from May may be primarily miscounting and rounding error. So, he would claim, no new reliable information for the market to react to. He would even disagree that the trend is up, claiming only that the system is very fragile. It is fragile, and there are still some longer term imbalances to be rectified, but this is where we differ. I think the jobs, confidence, production and other key trends are moving in the right direction. With S&P 500 now sub-900, and the DJIA testing its lows of the last 2 months, I’m inclined to be more constructive on equity valuations.
