Have been tracking the jobs information since last August. Three categories are paramount for me. Non-farm payrolls (the total), private and government. What interests me the most of the three is not the total number each month of job declines but the percentage change that number represents from the total employed the month before.
Why? If we have a firm that employees 10 people and lay off one, we have laid of 10% of the workforce. If we double employment to 20, then lay of 2, we have still laid off 10% BUT, people would also be accurate in saying “layoffs have increased 100% (from 1 to 2)”. In this case, simply looking at the total number skews reality. For that reason I want to know what percent of the total who had a job the month before lost it. Then I want to know how that percentage is trending. I also want to know this for the private sector and government.
Here is the datat from the (BLS all numbers seasonally adjusted where applicable):
The number do show an improvement in the rate of decline since the Dec./Jan. highs.
The key point to note is the April numbers. Without the highly abnormal hiring done by the government (72k jobs for temporary census workers), the improvement in April would have been roughly halved. Noting that does place a large dose of doubt as the the “improvement” in the job situation. May estimates are for -532k non-farm job loses in May (to be released 6/5).
My thought is that number is too low. I think -575k or greater is more likely unless the government hired another 72k people like it did in April. Assuming the government employment changes are normalized, then I think a spike is in order…
Again, what is of more importance is how government hiring effects this number and does the rate of decline in private sector jobs abate. True growth will only come from the private sector. Government can only grow payrolls and pay for them either through increased borrowings or increase takings of private capital (taxes). Neither is conducive to growth. We cannot keep losing a greater percentage of private jobs that the overall picture would lead us to believe and hope the economy improves soon.
That also goes to earnings. Q2’s earnings were better than many of the reduced expectations. BUT, it was not due to top line sales growth but increase cost cutting (jobs). If we have sales declining but cut costs ahead of them, then we can improve the earnings picture. Now, this is not to say this is a bad thing, but it is reality.
Disclosure (“none” means no position):