Once again we are seeing that JOBS are the canary in the coal mine!!
This month’s employment report shows 120,000 new jobs were created last month. Once again, this is a pathetic number! Economists expected 210,000. But, you know from reading these updates that our economy needs at least 100,000 jobs per month just to place young people entering the work force. In addition, we need at least another 100,000 to place the 8,000,000 people laid off during The Great Recession! That is a minimum need for new jobs of 200,000 per month!!
Here is where the report gets jiggy. Of the 120,000 jobs created 90,000 were fiction. By this I mean the government used the birth / death model to generate 90,000 jobs. The birth / death model is a telephone survey of small businesses. The businesses are called up on the phone to be surveyed for the number of people employed. If they do not answer, as in they are out of business, it is assumed they were all rehired elsewhere. Then any new jobs created at companies that do answer the survey, are added as such.
So, the employment report was actually much worse than the 120,000 jobs reported. In fact, it is more realistic to report that only 30,000 new jobs were created. In an economy that is reported to be four years into an economic recovery this number is not only alarming, it is pretty scary! Why? Because it suggests we are not growing our economy at all and likely contracting once again.
The next key number to reflect expansion or contraction in the economy will be the Gross Domestic Product (GDP) for the first quarter of 2012. That will be released in two weeks on 4-27-12. I will share some insights on what to expect of the GDP number in next week’s update. For now, I would suggest we are looking at a GDP number of less than 3% and we need 3%, or more, to produce anything resembling growth in job creation!
I am interested in your comments. E-mail me at email@example.com.
Jim Lunney, CFP, RIA