The monthly employment report seemed to post a headline number that was good, at least at first glance. But when you examined the report more closely, it showed a lot of weakness in the jobs market, as Profit Confidential highlighted in the article, The Hidden Bad News in the November U.S. Job Numbers Report. This week, we just had another interesting report: the non-manufacturing ISM report.
There are two ways of interpreting this number that are important. The first is whether the trend is up or down compared to previous months. The second is whether the number reported is over/under 50. A number under 50 denotes contraction. You will also note that many news organizations and politicians only like to report the headline number and not what’s deep in the report. If I bought a house, I would want to know if it was built on sand or stone. The foundation makes all the difference in the world.
The headline-reported number was over 50, but less than the previous month, which means it is trending down. More troubling was the employment section, which showed a drastic decline to 48.9 compared to 53.3 the previous month. Not only is this a sign of contraction in the jobs market, the difference between the two months is huge.
Another troubling section is inventories; they are rising very quickly, which is a bad sign. Again, looking at the difference between months shows a massive rise from 45.5 in October to 52.5 in November. Inventories matter, because this is a sign that consumers aren’t clearing away the shelves by buying all of the products. The goods made are just sitting on the shelves, for how long no one knows. If they sit for too long, then companies will slow down production and that will hurt the jobs market.
This is only one report, of course. But it makes sense when you combine these underlying data points with the employment data on Friday that showed a huge number of people who have just given up looking for work. But there are more gloomy data out for the jobs market.
The Gallop poll of underemployment offers us another way to view the jobs market, one which shows dark clouds over the “positive” job report. The report looks at underemployment, which combines the unemployed with people who work part-time and want full-time work. This number was 18.1% in November, up from 17.8% in October and 17.2% a year ago.
Put simply, the people who have gotten jobs are now part-timers. Since the economic collapse started, over nine million full-time jobs have been lost. Yes, some have gotten jobs, but they’re now working part-time. You can’t really call this a recovery when you lose a full-time job and get a part-time job, which usually pays less per hour and many don’t have any benefits at all.
This also creates a fragile economy as part-time workers are easier to fire than full-time employees. This creates unease and less confidence in spending by part-timers. Very few part-time workers would be confident to step up and buy properties, which they most likely can’t afford anyway, even after the huge price drop in real estate. They will also spend less money, because they make less, and only on necessities and lower-cost goods. The children of part-time workers will also have fewer chances for a high-level education, which means less innovative leaders for the next generation.
This is a huge warning sign for America. It’s sad for any politician or news organization to brag about job growth if this is what we’re left with; millions of low-paying, part-time jobs. If this continues, the U.S. economy will be built on a foundation of sand.