Dear ,
The big news last week centered on the August jobs report, which was disappointing to say the least. Non-farm payrolls were unchanged in August but down 58,000 including revisions to June/July. The consensus expected a gain of 68,000. The unemployment rate remained unchanged at 9.1%. [1] Can anyone tell me when is the last time the consensus was even close to being correct?
U.S. stocks tumbled 2% on Friday [2] in reaction to the news, as headlines showing zero jobs growth in August fueled investor concerns. And while the August numbers are certainly not attractive, there are a few underlying factors we would like to draw your attention to that should cause even more concern. But first let's look at this chart which is provided courtesy of Shadowstats.com.
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(Please click chart to go to Shadowstats.com. You'll be amazed at what you find there.) |
The great thing about Shadowstats.com is that they show U3, U6, and the way unemployment was calculated in the old days; all on the same chart. The line I want to call you attention to is the middle one, U6. This is the unemployed, plus all marginally attached workers, plus total employed part time for economic reasons as a percentage of US labor force. It stands at over 16% now.
Many of you may remember that this is an issue that we have written and talked about in the past. One of the biggest obstacles that the unemployed face is not the other unemployed but the 8.8 million part time workers who would take full time work if they could find it.
Think about it. If you are an employer and you have two equally qualified people sitting in front of you, one who hasn't worked in two years and one who has at least been working part time the last two years, who are you going to hire? When I ask that question to people, the answer I get most often is, "the guy that is working part time."
It's not that the employer wants to punish the guy that hasn't worked in two years but you just don't know how much of his skills he has lost in the last two years. At least you know that the guy that has been working part time probably has a current and sharp skill set.
For a more in depth look at this issue you might want to check out this article.
Unemployed Vie with Underemployed for Job
The second big issue for the unemployed is another issue that most people don't even realize is out there. We need to create around 150,000 jobs a month just to absorb the new workers that are graduating from high school and college and entering the workforce! As a reminder, these people have never had a job yet so they aren't counted in the unemployed numbers.
That's 1,800,000 jobs needed just for new people entering the work force. Add on top of that the 8,800,000 that are working part time that would rather work full time, and then you finally get to the totally unemployed which is at around 14,000,000. That gives you a total of almost 25,000,000 people looking for full time work!
And that folks is the true depth of the problem. Why is this an issue? Because 70% of the US economy is driven by consumer spending. It's awfully hard to spend money that you don't have and it's awfully hard to have spending money without a job. Don't look for a solid recovery until that starts to change.
ECONOMIC CALENDAR:
Monday - U.S. Holiday: Labor Day
Tuesday - ISM Non-Mfg Index Wednesday - Beige Book Thursday - BOE Announcement, ECB Announcement, International Trade, Jobless Claims, EIA Petroleum Status Report
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