An emotional, jubilant hooray! could be heard earlier this month when the Bureau of Labor Statistics (BLS) released its latest jobs numbers for January 2012, showing the addition of 243,000 net new jobs. That's the kind of news both the financial markets and the political complex were yearning for, because it implies that growth is finally greater than the rate at which new workers enter the labor force due to US population growth alone.
But the report was not without controversy. Significant revisions to BLS sampling were introduced in this report as a result of the recent integration of the 2010 census data. Recalibrated, this altered the size of the workforce, and thus changed the number of Americans either working, looking for work, or dropped out of the workforce altogether. And so the cries of Foul! began.
Those who see politics in the numbers are perhaps overreaching. Likewise, those who see the dawn of a new era of resumed job growth are also likely premature in their celebration.
The fact remains that the United States is still at the beginning of a long journey in clearing the vast tranche of structural unemployment, sadly left in the wake of the Great Recession. A weak dollar, an emerging megatrend towards exports, and attractive business conditions should combine to enable the United States to slowly, eventually pull itself out of its current economic sinkhole.
But accurately identifying the true strength of any US recovery will be crucial, as certain portions of the economy emerge from the rubble of the past few years while other sectors languish. It's notable, for example, that after a decade-long bear market, technology stocks and the Nasdaq 100 may now be indicating that a more sustainable recovery lies ahead. For those of us who monitor the resource scarcity story, we know that technology will not fundamentally alter actual natural limits. But on the other hand, we need to be mindful that technology still offers the promise of mitigating our resource dilemma, helping from the margin as we move through a rough energy transition.
In the wake of the jobs report, US Treasuries and gold, the two asset classes that have offered safety through the past few years, faltered. Right or wrong, global markets were jolted by what's commonly called a "growth scare."
The question at this juncture is how durable is such a scare as this? Does this portend a major shift in our familiar, decadal trends? Or is it just a blip, as the Great Stagnation lumbers onward?
And what will be the implication for the future price of gold?
Jobs Data Kerfuffle
The US employment data series that I have long favored is not the unemployment rate or non-farm payrolls, but simply the raw number of all those currently employed in the system. While other series are important, the Total US Employment figure has probably given the best, undiluted read on the US jobs situation.
Yes, it's true that over the past year, government jobs have been lost while private payrolls have risen. Such trends cause many analysts to currently favor the Non-Farm Payrolls series. Also, with so many discouraged workers, the series on the Participation Rate is also important. Nevertheless, much of the contentious dispute that arose after the jobs report centered on that Total US Employment figure, as well as the big gap that opened up between the seasonally adjusted (SA) version and the non-seasonally adjusted (NSA) version.
Let's take a look at each:
In the above chart of Total US Employment, you can see that a workforce recovery has been gathering steam for the past year. But with the January Jobs Report, employment soared by over 847,000 jobs from 140.790 to 141.637 million employed. That's a big jump and the biggest monthly gain since the 2008 trough of 138 million.
Now let's look at the same data series, non-seasonally adjusted (NSA):
Whoa, what's this? In the non-seasonally adjusted (NSA) data, January actually saw total employment in the US fall by 737,000 jobs, from 140.681 to 139.944 million employed. That huge gap of nearly 1.6 million workers between the SA and the NSA data was due to the recent BLS statistical revisions and the source of the resulting disputes.
But a few comments on this issue. One, there is always a gap between the seasonally adjusted and non-adjusted time series. Eventually the conformity between the two is ironed out. Second, despite the broad scope of this series, it does not tell us the actual nature of the jobs Americans are taking. Are they full-time or part-time jobs? What supporting data can we glean from tax receipts?
Unfortunately, and unsurprisingly, the US economy is indeed adding jobs, but these are not high paying jobs, nor are they overwhelmingly full-time jobs.