May Jobs Stink: No Fed Rate Hike in June

I know where this little creature could be placed and get some action going with manufacturers of substandard appliances

the Market will Fall before year is out once again. too many Greedy Folks.. God Don't like Ugly !! KA MA.. JS

Not to disagree with Jill on Money but keep in mind that there is a huge bump in under the table jobs starting up right now. That is going to make it look like people are giving up and not falling off the unemployment calculation.

Not to pile on here (and with deepest apologies for doing it anyway), but Schlesinger’s attribution of Q1 real GDP weakness to “plunging oil prices, a stronger U.S. dollar and weakness in China” reminds one of the monotonous, shallow media scapegoating we’ve become so accustomed to seeing over the years: bad weather, strong dollar, oil, etc. Heaven forbid that a TV network economics reporter would actually examine the details to discover if there was any truth to the reflexive attributions they typically conjure, let alone delve into the details to discover the real causes. Presumably Schlesinger attributes a strong dollar as the putative culprit for weakness in exports that supposedly gets coupled with a corresponding strength in imports, and together these supposedly caused the trade imbalance to balloon, thus dragging down real GDP in the first quarter. But is this attribution credible? If a strong dollar was to blame for Q1 GDP weakness, we would have seen a deep decline in our relatively more expensive dollar-denominated exports coupled with a surge in relatively less expensive foreign currency-denominated imports. But that’s not what we see when we look at GDP or trade data. Both imports and exports of goods have declined deeply since peaking in 2014. When you examine real GDP components, the unfavorable trade impact from Q4 to Q1 accounts for a quarterly change of just $9.3 billion in chained 2009 dollars, or only about 0.23% of the 0.84% real GDP growth. Had the trade deficit remained unchanged in Q1 from Q4, real GDP would have come in at 1.05%, not really a substantial difference. Looking at FT900 Trade data from Census, the monthly unfavorable trade impact on a balance-of-payments basis averaged $44.58 billion per month in Q4 of 2015. It was barely changed at $44.46 billion per month in Q1 of 2016. So a strong dollar is not the likely culprit since there was essentially no major trade impact. What about the China slowdown attribution? Does this have any credibility? Needless to say, China’s growth rate has declined and the dollar value of both exports and imports show negative growth rates. Imports into China went negative in Q4 of 2014 and the pace has gained steam in recent quarters. Imports declined by 11.8% in Q4 of 2015 and another 13.3% in Q1 of 2016. Exports went negative in Q2 of 2015. Q4 of 2015 saw a decline of 5.2% and Q1 of 2016 saw another decline of 9.7%. So the pace of decline in both is gathering steam. But what does this have to do with the U.S.? Did American consumers and businesses curtail their imports from China in Q1 and thus contribute materially to this slowdown? Actually, the unfavorable trade balance on goods from China in Q4 of 2015 was $92.1 billion while in Q1, it grew to $102.3 billion on a balance-of-payments basis. So the U.S. actually boosted its goods imports from China in the first quarter of 2016. As to combined goods and services, the unfavorable trade impact climbed from $80.3 billion in Q4 to $81.6 billion in Q1. If China’s economic weakness accounted for reduced global GDP, the U.S. was not a culprit since it actually increased its purchasing of Chinese-made goods and services in Q1. That leaves “plunging oil prices” as Schlesinger’s last culprit. What impact did this likely have? Based upon domestic crude oil production at average spot prices observed over each of the quarters, the total downside revenue impact to domestic crude oil producers between Q4 and Q1 could not have exceeded $6.9 billion. How about further downstream? Did refiner margins change substantially? Crack spreads barely changed from Q4 to Q1. RBOB gasoline crack spreads were essentially flat during the 6 month period. Diesel spreads declined in Q4 and ticked up in Q1, but average values across the quarters were nearly identical. So the only measureable changes that petroleum refiners experienced between Q4 and Q1 would have been attributable to declines in product prices which were offset dollar-for-dollar by improvements in refiner margins from lower crude purchase prices. So the real GDP impact based upon a downside domestic oil impact of $6.9 billion would have been 0.091%, or less than one tenth of a real GDP percentage point. So strike lower oil prices off the list of credible causes. How about at the consumer level? Did lower gasoline prices improve consumer purchasing power for other goods and services? Average on-highway gasoline prices actually increased in Q1 to $2.35 per gallon from $2.09 in Q4. Consumers reduced gasoline consumption, spending about $2.4 billion less in Q1, so the real GDP impact was essentially negligible. It isn’t difficult to spot the real culprit for economic decline in Q1. It was the same for disappointing results in Q4 of 2015. Examine Table 1.2.6. Real Gross Domestic Product by Major Type of Product, Chained Dollars from the BEA website. There, one can readily note that the Goods-Producing portion of the economy has been in decline since Q4 of 2015. The Q1 impact of minus 2.2% was 3.4 times greater than the negative impact in Q4. Both quarters showed disappointing real GDP results with Q4 advancing by an annualized rate of just 1.386% and Q1 by 0.84%. Had the Goods-Producing portion of the economy maintained its prior 12-month growth trend of 1.45% per year through to Q3 of 2015, Q4 of 2015 real GDP would have come in at 2.07% and Q1 of 2016 real GDP would have come in at 2.05%, both of which are shockingly close to the long-run annualized recovery growth rate of 2.09%. This more than any other factor is why GDP has shown disappointing results in the past two quarters. The U.S. is in an industrial recession, and it appears to be the best kept secret in the world.

Jill Schlesinger perpetuates the falsehood about 38,000 Payroll job gains in May. Everywhere you look in the media, the 38,000 figure is repeated. In reality, the accurate number is minus 21,000. That is because while the May number is 38,000 higher than the new April jobs count, the April and March numbers were both revised down simultaneously by a combined 59,000 jobs. Check the numbers for yourself. In the April report released on May 6th, BLS told us that the count of Non-Farm Payroll jobs was 143,915,000. Scroll two-thirds of the way down to the first page of the Payroll Survey (link below) in Table B-1 Establishment Data for the April number (maddeningly, they don’t put page numbers on this report). It shows the 143,915,000 Total Non-Farm Payroll jobs number at the top under the April 2016 heading. https://www.bls.gov/news.release/archives/empsit_05062016.pdf Now do the same thing in the May report released on June 3rd. BLS now tells us that the May 2016 count of Non-Farm Payroll jobs is 143,894,000, a number which is actually 21,000 lower than the figure we were looking at for April 2016. https://www.bls.gov/news.release/archives/empsit_06032016.pdf It's sort of like having your pay reduced 20% in one month, then getting another 10% add back in the next month, and then reading in the paper that everyone at your company got a 10% pay raise. Your paycheck today is smaller than before they started all the shenanigans. This is not exactly a new trend. In 15 of the previous 16 months, the Non-Farm Payroll jobs count we are looking at today is lower than the number originally reported by BLS. In only one single month, January 2016, did we see a monthly Non-Farm Payroll jobs count announcement that was smaller than the number we see today. The average downward revision over those 16 months is minus 104,063 jobs. When you miss 15 out of 16 times in the same direction with a magnitude that is nearly 3 times greater than today’s putative monthly jobs gain figure of 38,000 (which as we know was really minus 21,000), it indicates upside estimating bias by BLS. You can verify the truth of this yourself by pulling up each of the monthly reports on the first link (Scroll down to Table B-1 in each) and then compare it to the monthly Payroll jobs count we now have on the second link: https://www.bls.gov/schedule/archives/empsit_nr.htm#2016 https://data.bls.gov/timeseries/CES0000000001 Schlesinger is right to suspect more bad news on the jobs front is headed our way. BLS has been generous in its seasonal adjusting thus far in 2016. Had 2015 seasonal adjustment factors been applied in 2016, the May report would have shown a count 23,000 lower than the revised April number, not 38,000 higher. Because this seasonal adjusting “generosity” has been underway since the start of the year, we are probably sitting on a 60,000 or so jobs overestimate today. So that reduction will need to be allocated in coming months.