Labor Report Shows Gains, The Market Impact, EU Troubles

Editor’s Note – The monthly jobs report is in and many are calling it an improvement while others are much more skeptical. Yes, there was a sizable gain in jobs, and the U1 rate stayed at 5.5%, but those are deceptive because of the numbers that underlie the broader picture.

Americans are finding jobs, but at a dismal rate when you look at history outside of recent recovery years prior to this one.  Too many people are out of the work force but those numbers are also slightly lower.unemployment Blues

Overall, it is still a lackluster recovery, and when one looks at the details and also includes the global picture, we are a long way away from a ship sailing right on its keel.

We caution optimism here because these better numbers are still quite small and other factors are not improving.

The 1st quarter GDP numbers were surprising as the economy retracted, but the Bureau of Labor Statistics revised and excused the “anomaly” and showed us a rosier picture to coincide with the more positive labor report.

But as usual, it is little solace to the millions not even in the labor force or those forced into part-time work – underemployment not even close to their potential.

BLS LogoWith this news, the stock markets were weary that a positive change may forestall the much discussed rise in interest rates, maybe even into the election season.

The markets closed down today and showed a loss for the week. (Read more below.) The markets like certainty, and they are not getting it from Janet Yellin as the reports emerge like today.

Here is a compilation of these numbers, and a reminder that things in Europe are more uncertain and now it appears that the Greeks are seeking advice from Russia’s Putin.

Global uncertainty, and a detached stock market make for highly uncertain times and somewhat implausible numbers as Zero Hedge points out below as well:

92,986,000 Non-participants in the workforce:

The month of May saw 92,986,000 people not participating in the workforce, according to new data released Friday by the Bureau of Labor Statistics reveals. May’s total represented slight decline compared to last month’s record, which saw 93,194,000 people outside the workforce.

The BLS defines those not in the labor force as people ages 16 and older who are neither employed nor “made specific efforts to find employment sometime during the 4-week period ending with the reference week.” The labor force participation rate came in at 62.9 percent, a slight uptick compared to April’s 62.8 percent. (Breitbart)

55,951,000 Women out of the workforce:

Mirroring the national numbers, the number of women outside the workforce experienced a slight decline in May, according to data released Friday by the Bureau of Labor Statistics. In April, the number of women not in the workforce hit a record 56,167,000. Come May, that number declined to 55,951,000.unemployment

With the number of women out of the labor force decreasing, so the number of women in the civilian workforce increased from 73,267,000 in April to 73,577,000 in May. The workforce participation rate among women also experienced a slight uptick to 56.8 percent. (Breitbart)

6,652,000 More Americans Working Part-Time, but not by choice:

Another 72,000 workers were working part time last month because their hours were cut or they couldn’t find full-time work. The total number of involuntary part-time workers jumped to 6,652,000 in May, up from 6,580,000 in April, but well below the 7,268,000 in May 2014, according to data released Friday by the Bureau of Labor Statistics (BLS).

According to BLS, involuntary part-time workers are “persons who indicated that they would like to work full time but were working part time (1 to 34 hours) because of an economic reason, such as their hours were cut back or they were unable to find full-time jobs.” (CNS News)

“The Job Numbers Literally Do Not Add Up” – Productivity:

Payroll Stats Become Even More Implausible – Since Q1 GDP was revised lower by almost 1% that meant estimates of productivity were going to be even more out of alignment than they were at the first release. Of course, in a less massaged environment productivity might have preserved some sense if there was less rigidity from the BLS on the employment side.

In other words, when “output” estimates were reduced (and they were, by more than GDP) it would make sense that everything would be revised downward in a more cohesive process. Instead, output was reduced significantly, by 1.4%, while total hours worked was marked down by all of 0.1%. As a result, productivity is revised from a nonsensical -1.9% to an even more skeptical -3.1%. (Zero Hedge)

Greek Crisis & Great Britain Threat to leave the EU:

Greece crisis live: PM tells parliament a debt deal can be done as stocks slide and Athens looks to Moscow. Greece will have to pay €1.6bn to the IMF and €1.5bn in pensions and wages by the end of the month. (Video from the UK Telegraph)

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IMF director Christine Lagarde and Greek finance minister Yanis Varoufakis in happier days (AFP)
IMF director Christine Lagarde and Greek finance minister Yanis Varoufakis in happier days (AFP)

More from Zero Hedge on Greece:

Greek Banks On Verge Of Total Collapse: Bank Run Surges “Massively” As Depositors Yank €700 Million Today Alone – While the Greek government believes it may have won the battle, if not the war with Europe, the reality is that every additional day in which Athens does not have a funding backstop, be it the ECB (or the BRIC bank), is a day which brings the local banking system to total collapse.

As a reminder, Greek banks already depends on the ECB for some €80.7 billion in Emergency Liquidity Assistance which was about 60% of total deposits in the Greek financial system as of April 30. In other words, they are woefully insolvent and only the day to day generosity of the ECB prevents a roughly 40% forced “bail in” deposit haircut a la Cyprus. (Read more here.)

The British Issue from the AP:

The prospect that economic and diplomatic heavyweight Britain might leave the European Union within two years has pushed EU leaders to consider concessions to keep the country in the fold.Unemployment-2

EU founding members like Germany and France are moving outside their comfort zones, surprisingly receptive to British Prime Minister David Cameron’s call for change ahead of a referendum that will allow citizens to vote on whether to stay or go before the end of 2017.

With Europe’s top priority the very real risk that Greece might fall out of the euro single currency, Cameron has found a surprisingly open ear in many capitals of the world’s biggest trading bloc.(Read more at AP)

GDP drop in the first quarter of 2015:

June 25th in the Wall Street Journal:

Gross domestic product, the broadest measure of goods and services produced across the economy, fell at a seasonally adjusted annual rate of 2.9% in the first quarter, the Commerce Department said in its third reading of the data Wednesday.

That was a sharp downward revision from the previous estimate that output fell at an annual rate of 1%. It also represented the fastest rate of decline since the recession, and was the largest drop recorded since the end of World War II that wasn’t part of a recession. (Read more at the Wall Street Journal)

But the Bureau of Labor Statistics reports today:

Real gross domestic product — the value of the production of goods and services in the United States, adjusted for price changes — decreased at an annual rate of 0.7 percent in the first quarter of 2015, according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.2 percent.

The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, real GDP increased 0.2 percent. With the second estimate for the first quarter, imports increased more and private inventory investment increased less than previously estimated (for more information, see “Revisions” on page 3).

The decrease in real GDP in the first quarter primarily reflected negative contributions from exports, nonresidential fixed investment, and state and local government spending that were partly offset by positive contributions from personal consumption expenditures (PCE), private inventory investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. (Read more here at the BLS)

Stock Market:

U.S. Stocks Close Slightly Lower

Jobs report provides evidence to investors, traders that economy is lifting out of first-quarter slump

By DAN STRUMPF – Wall Street Journal

Stocks fell Friday as the strong May jobs report cemented expectations that the Fed will begin raising borrowing costs this fall, capping a volatile few days for stocks that leaves major benchmarks slightly lower for the week.

Traders and investors said the May jobs report offered evidence that the U.S. economy was pulling itself out of its first-quarter slump. While a firming economy is usually a good backdrop for stocks, investors say the hiring pickup keeps the Federal Reserve on track to start raising short-term interest rates as soon as September, potentially boosting borrowing costs for businesses and consumers alike.

Stocks spent the Friday session swinging between gains and losses before settling with a modest decline. The Dow Jones Industrial Average lost 56.12, or 0.3%, to 17849.46, bouncing back from an loss of as much as 83 points earlier in the session.

The S&P 500 index fell 3.01, or 0.1%, to 2092.83, while the Nasdaq Composite Index rose 9.33, or 0.2%, to 5068.46.May5.15DowClose

Stocks ended the week lower, after an early-week rally that petered out. The S&P 500 is down 0.7% for the week, while the Dow is down 0.9%.

Major stock benchmarks have pulled back in recent sessions from record highs reached just last month, weighed down by a cocktail of uneven economic data, murkiness over the Fed’s course of action and lofty valuations. The Dow is off 2.5% from its high reached May 19. The S&P 500 is down 1.8% from its May 21 high.

“For the economy, the bottom line is that [the jobs data] is a good number,” said Brent Schutte, senior investment strategist at BMO Global Asset Management, which oversees $249 billion. But he added:

“To the extent that it brings people closer to believing that the Fed will raise rates in September, it will be near-term hit to the equity markets and the bond markets.”

The solid jobs report sparked sharper selloff in the bond market, lifting the yield on the benchmark 10-year Treasury note to an eight-month high of 2.402%, from 2.309% on Thursday. It is the highest closing level since Oct. 6. Bond prices fall as their yields rise.

For the week, the yield climbed by 0.305 percentage point, the biggest weekly rise since June 2013 when the bond market was rattled by the “taper tantrum,” or fears over reduced bond buying from the Fed.

The bond market has sold off since late April after a strong run-up in price over the past year. Many investors are recasting their portfolio as they believe the rise in bond yields reflect an improving economic and inflation outlook in the U.S. and the eurozone. (Read the rest here at the Wall Street Journal.)

Job Report 5.9% – Why the Malaise? The Numbers Game

Editor’s Note – Once again we have a ‘Jobs Report’ emerge with mixed messages, but is it truly mixed?  The September report came out this morning and showed growth and on that positive number, we are sure we will hear Obama continue to brag about the longest cycle of job growth in our entire history.

A crisis in confidence, we are in a malaise akin to the Carter years when the last low in the participation rate was as low as it is today.
A crisis in confidence, we are in a malaise akin to the Carter years when the last low in the participation rate was as low as it is today.

That sounds wonderful, but why is there such malaise and melancholy among working and non-working families alike? There are several reasons, and even though we post an article from CNBC/Politico, they correctly point out some very salient points you will not hear Obama ever talk about. Three aspects jump out at us, and this is a continual point we have been making for years.

Where is the growth in salaries? What about the continual rise in the number of people who have given up and the participation rate has fallen to a 30 year low? Last, what kind of jobs are being created, especially since Obama Care has forced so many employers to cut hours to stay viable?

The administration lauds job growth, but Americans do not just need subsistence jobs, they need to resurrect their careers, or create one. Holding down two part time jobs to keep food on the family table is not the American dream.

Careers, gained through expensive education and on-the-job experience growth have been lost or closed down to so many. Earning potential is a thing of the past under the current paradigm of work. This is a “a recovery that the vast majority of Americans barely feel.”

We not only have a ‘crisis of confidence‘, we have a ‘malaise’ ala Jimmy Carter.

Jobs report underscores Obama’s economic dilemma

By Ben White – CNBC

The September jobs report perfectly captured the frustrating nature of the current economy, showing a healthy gain of 248,000 positions and a reduction in the jobless rate to 5.9 percent but no gain at all in hourly wages.

The report also highlighted the vexing and possibly unsolvable problem for President Barack Obama and the Democrats who want to take credit for measurable improvements in the economy from the rancid depths of 2009 but can’t effectively cheerlead a recovery that the vast majority of Americans barely feel.

Speaking at Northwestern University, President Obama highlighted what he said were clear improvements in the economy since he took office. Video by Reuters on Publish Date October 2, 2014. Photo by Doug Mills/The New York Times.
Speaking at Northwestern University, President Obama highlighted what he said were clear improvements in the economy since he took office. Video by Reuters on Publish Date October 2, 2014. Photo by Doug Mills/The New York Times.

In most respects, the September report was quite strong. August’s soft number got revised up to 180,000 and July was boosted to 243,000 from 212,000. History tells us September could get revised higher as well.

But there was a soft underbelly as well.

The size of the labor force dropped by nearly a hundred thousand putting the participation rate at a more than three-decade low of 62.7 percent. Before the recession the rate was 66 percent.

Even more troubling, average hourly wages actually dropped a penny to $24.53. The so-called U6 jobless rate, which takes into account involuntary part-timers and those too frustrated to look, is still at a very high 11.8 percent.

Obama’s economic dilemma was on full display this week when aides touted a big presidential speech on the economy at Northwestern University’s Kellogg School of Management. The speech was intended to show voters who give the president dismally low marks on the economy that Obama was on the case while highlighting all the improvements over six years ago.

But the speech, which included a tired recitation of previous proposals that went nowhere on Capitol Hill, fell completely flat. In fact, the only real headlines out of the address were generated by Republicans crowing over Obama’s remark that: “I am not on the ballot this fall. … But make no mistake: these policies are on the ballot. Every single one of them.”

Democratic candidates in competitive Senate races are running as fast they can away from the president and his low approval ratings. But now GOP ad makers have a perfect sound bite to run in Arkansas, Louisiana, North Carolina, Alaska, Iowa and elsewhere tying Democrats directly to the president.

How Obama could have made such a rhetorically boneheaded move is hard to comprehend.

Polls show the public has largely rejected Obama’s stewardship of the economy. They also show that the economy is the No. 1 issue in the midterms. The last thing the party wants are voters in battleground states making their decisions based on Obama’s economic record. But now they may do exactly that and at the president’s own request!

It seems like it is probably time for the White House to give up on the idea that the president will get much credit for where the economy is right now. Most of the policies that had significant impact—the stimulus and the bank bailouts—are well in the past. Since the 2010 midterms, Obama has little to show on trade deals, tax reform, immigration reform or any of the other big-ticket items that could move the economic needle and drive up wages and the pace of growth.

The White House argues that Obama tried on a lot of these items by sending proposals to the Hill. All fair and true. But people don’t really care about what you tried to do (and in many instances the White House didn’t try very hard). They care about what you actually did.

But there may yet be hope on the horizon for beleaguered Democrats hoping to maintain control of the Senate. According to Politico’s Maggie HabermanHillary Clinton is preparing a midterm political blitz to aid Democratic candidates in Kentucky and other swing states.

The Clinton brand is much stronger than the Obama brand right now, particularly on the economy where voters still recall the Bill Clinton years quite fondly. Hillary Clinton may have some heavy foreign policy baggage from the Obama years but she is not tied to people’s ill feelings about the president’s job on the economy.

Hillary Clinton can also make the midterms about the Democratic Party’s future, not the last six years of painful, plodding, poorly distributed economic growth. That may not turn out to be enough to keep the GOP from picking up the six seats needed to retake Congress’s upper chamber. But it’s certainly preferable to Democrats than making the election all about Obama.

—By Ben White. White is Politico’s chief economic correspondent and a CNBC contributor. He also authors the daily tip sheet Politico Morning Money [politico.com/morningmoney]. Follow him on Twitter@morningmoneyben.