May's Jobs Report: As Good As We'll See This Year?
There's little doubt that the short post-Memorial Day week gave us some of the worst economic news the country has seen since painfully slow job growth began again in March 2010.
Tuesday's consumer confidence index from the Conference Board was expected to show a slight gain; instead it headed sharply down. That day's release of the Case Shiller Home Price Index for March showed overall home prices in the cities surveyed "at the lowest levels since the housing crisis began." On Wednesday, the National Association of Realtors reported that seasonally adjusted pending home sales in April fell by 5.5%. Also that day, the Conference Board's Help Wanted Index dropped for the first time in five months.
The hits just kept on coming. Thursday's government report on economic growth reduced the first quarter's expansion from an already pathetic annualized 2.2% to 1.9%. For those keeping score, as yours truly has been, this means that the economy under Obama has expanded less than 7% in the eleven quarters since the recession's end, and is only about 1.3% larger than it was when the recession began. Under Ronald Reagan, the post-recession eleven-quarter expansion was almost 16%; at that point, the economy was almost 13% larger than it was when the Reagan-era recession began in July 1981.
Also on Thursday, the charade known as the weekly unemployment claims report, which was expected to show stability at about 370,000 new claims, came in with 383,000, which was 13,000 more than the previous week before it was upwardly revised to 373,000. As has been the case in all but one of the most recent sixty-plus weeks I have tracked (the only exception showed no change), this week's figure will almost definitely be pushed upward next week.
On Friday came May's employment report from the Bureau of Labor Statistics. While May wasn't good in any real sense considering where the economy is, it truly wasn't as bad as April.
Yes, the unemployment rate went up a notch to 8.2%, but the seasonally adjusted number of Americans employed per the unemployment rate's Household Survey increased by over 400,000 (more on that number later). Additionally, May's raw numbers in the Establishment Survey of employers used as the basis for the official figures on jobs added and lost were nowhere near as grim as April's.
In my May 7 column on the April jobs report, I noted "how lucky the administration was (at least I hope it’s luck) that the seasonal conversions to 115,000 and 130,000 jobs added overall and in the private sector, respectively, came in as high as they did." On Friday, BLS knocked those two respective numbers down to 77,000 and 87,000:
The revised overall and private-sector raw numbers for April 2012 are now 322,000 and 292,000 lower, respectively, than their 2011 counterparts. They are also far lower than the raw numbers seen in 2004 and 2005, the best economic years of the previous decade. Based on those huge differences, it would not have been at all unreasonable if the seasonal adjustment sausage maker had cranked out negative numbers for April with those revised results.
Given the huge break they got in April, the seasonal adjustments in May's jobs report largely represent the delivery of just desserts to Team Obama. This time, estimated overall and private-sector jobs actually added came in 140,000 and 65,000 higher, respectively, than May 2011, the first of several months in last year's failed "Recovery Summer" sequel. Yet the former number only led to a tiny improvement compared to 2011 after seasonal adjustment, while the latter figure's seasonal adjustment came in lower. In this context, as well as that of 2004 and 2005, 120,000-plus readings after seasonal adjustment wouldn't necessarily have been out of line. But it would appear that in the schizophrenic world of seasonal adjustments, we can at least say, thanks to the official overall and private-sector readings of 69,000 and 82,000, that what goes around eventually does come around.
Though May was an improvement over April, it was still by no means acceptable, and was also marred by several troubling factors:
- May's raw additions included 204,000 jobs added in BLS's "Birth/Death Adjustment," which represents an estimate of jobs added at new firms (net of those lost at those which went out of business) which BLS somehow knows is out there but can't locate. The track record of this attempted adjustment is already pretty spotty; given the degree of pervasive economic uncertainty, it's even more questionable now.
- May's raw additions also included 73,000 temps, an area where job growth continues to occur about five times faster than in the rest of the economy.
- As to those 400,000-plus jobs added per the unemployment-rate report mentioned above, they occurred while the ranks of those employed full-time shrunk by over a quarter-million, and the number of part-timers ominously swelled.
Looking forward, May is likely as good as we'll see during the rest of the year. Recovery Summer Flameout Part Three appears to be on track to be worse than last year. Europe is a mess, most of the rest of the world's economy is slowing down, and whatever we may see in energy price reductions won't have much positive influence.
Far more important, "Taxmageddon" looms, and no one seems inclined to prevent it. As long as this is the case, employers will be extremely reluctant to hire or expand, and we'll be extremely fortunate to avoid another recession.
Taxmageddon promises tax increases for nearly every taxpayer on January 1, 2013. Unless Congress and President Obama head it off before the end of the year, the tax system largely in place during the past nine years (still known to most as "the Bush tax cuts") will essentially go back to the tax system as it previously existed. The "temporary" cuts in the payroll tax in place this year and last will also expire, while a plethora of ObamaCare-related taxes will kick in if the Supreme Court allows the law to partially or fully survive.
Everyone in Washington seems to believe that they can wait until after the election to deal with Taxmageddon. But what if Obama loses? Especially if Democrats hold the Senate, it would be completely in form for a soon to be former Punk President to turn spiteful, do nothing, stick Mitt Romney with a horrific problem he can't address until January 20, and skip town -- the country be damned. We simply cannot afford to risk that.