Wow, people are talking about the employment data for August, which is exciting, because it shows people are paying attention. Unfortunately, they are focusing on completely extraneous information and working themselves into a panic in order to justify their own political decisions. This shows just how badly informed the populace is about economic data. Let’s just start with the 94,391,000 people not in the work force, since it’s what people are talking about.
From the BLS website: “The survey is designed so that each person age 16 and over (there is no upper age limit) is counted and classified in only one group.” So the survey includes tens of millions of retirees, who are watching TV on the days they aren’t out playing golf or fishing. It also includes tens of millions of stay at home housewives and adults staying home as caretakers to elderly parents, who have no interest or ability to reenter the work force. It also includes tens of millions of full time students in high school, college, or post graduate programs who just don’t have the time to work.
Now, there are, in fact, some portion of that 94,391,000 people who are working age (younger that 65), out of work, and just discouraged, and that is the number we should be concerned about, but it’s very difficult to bore down to that number with any accuracy using the data available, and it’s only a fraction of the 94,391,000 number. So let’s focus instead on the other key numbers.
Highlights from the August Jobs Report
- Net nonfarm payroll rose by 151,000.
- the U-3 unemployment was unchanged at 4.9 percent.
- the U-6 unemployment dropped to 9.7 percent, and reducing by 0.4 points, but there was no change of the seasonally adjusted U-6.
- labor force participation rate, at 62.8 percent, changed little.
- employment-population ratio, at 59.7 percent, changed little.
The 151,000 jobs 100,000 fewer jobs than was created in July and is 60,000 jobs below the average of the last 3 years of August job numbers of 212,300. It is also 60,000 jobs below the average for 3rd Quarter job creation for the last 3 years of 211,800. This points to continued softening of the economy. It was below analyst predictions. In the background, jobs numbers for July were revised downward, bringing the 2nd Quarter job creation monthly average down to a very troubling 146,000 jobs.
Especially troubling are decreases in jobs in Construction of 6,000 jobs and Manufacturing of 14,000 jobs and Durable Goods of 16,000 jobs in August. Overall goods production decreased by 24,000 jobs, representing a fairly broad slow down in production in August.
Highlights from the 2nd Quarter Economic Report
- 2nd Quarter GDP grew at an annual rate of 1.1 percent, a -0.1 percent revision.
- 1st Quarter GDP grew at 0.8 percent (revised).
The final number for 1st Quarter 2016 is in at 0.8%. The 2nd Quarter 2016 number was revised downward from a grim 1.2% GDP growth rate to a grimmer 1.1% GDP growth rate. Accounting for govt spending, the economy is hovering around a 0% GDP growth rate. Combined with aggressive stimulus programs, such as quantitative easing and the federal funds rate still between 0.25% and 0.5%, this poor growth rate remains extremely troubling. Coupled with a broad base slow down in production and construction from the labor data, we still appear on track for a recession starting in 3rd quarter or 4th quarter 2016, though it does not appear to be a traditional recession.
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