It’s Jobs Friday—Let Us Count The Lies

It’s Jobs Friday—so the Wall Street spin doctors are out in force with the same old, same old. That is, positioning the junk data emanating from the BLS as evidence that all is Awesome on main street—meaning that today’s hideously over-valued stock market is, well, a buy!

Neither point is true, of course. Unless you think that bar, restaurant and hotel jobs, which accounted for 61,000 or 48% of the gain and which pay an average of $22,000 annualized, are the essential ingredients of Awesome, a more sober look beneath the headline is warranted.

S0 starting from the top, job slots do not pay the family bills: Labor market income comes from the rate of pay times hours worked. And the trend of the latter is not close to Awesome.

During October, in fact, the aggregate hours gain was just 1.1% versus prior year—meaning that the embedded slowing trend cannot be gainsaid. Between Q3 2010 and Q3 2018, private sector hours worked grew at a 2.1% per annum rate. So the October figure posted at just 52% of the prior trend.

Index of total private sector hours worked, year/year % change

As shown below, slowing hours growth comes first, then the recessionary plunge. Thus, as of Q1 2007, hours growth versus prior year was still rising at a 2.0% rate, but over the course of the next 12 months it steadily weakened until turning negative in Q2 2008. It then plunged violently after the stock market meltdown in September.

Needless to say, there was nothing in today’s release to suggest the recent sharp slowing  of total hours growth is some kind of aberration which will soon reverse. To the contrary, based on data we present below the present 125-month old, debt-encumbered expansion cycle is likely heading into the same swoon that happened after mid-2007 when the housing and stock market booms reached their apex.

Total Private Sector Hours, Change Vs. Prior Year, 2004:4 to 2009:1

As we noted recently, the jobs market does not resemble the perfect alignment of the Ohio State marching band. It proceeds in irregular rows reflecting the wide range of cyclical sensitivities embedded in the main street economy.



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