Fantastic headlines which managed to wipe the October blues away in one clean sweep for the USD rally to continue unchallenged.
The feedback from all professional fronts on the latest American job numbers have been POOR to HIGHLY CYNICAL and I really don’t blame them at all because it is really a disappointing development if you do not read the fine print.
248,000 jobs created in September (surveyed number) against expected 215,000.
August numbers revised up from 142,000 to 180,000.
Unemployment rate edged down to 5.9 percent, its lowest level since July 2008.
Average Hourly Earnings +2% YoY against expected 2.2%.
Labour Force Participation Rate 62.7% lowest since 1978.
Youth unemployment increased to 20%.
Low Quality Low Paying Jobs
Whilst headlines are blaring that 248k jobs were created, most of the jobs created were low level, low paying service sector jobs in supermarkets and restaurants for one. http://www.bloomberg.com/news/2014-10-03/food-economy-restaurants-supermarkets-fuel-job-growth.html
We may say that we do not need as many managers as we need workers and that is why 4 out of 5 jobs created were low or minimum wage jobs (US min. wage $7.25/hr). http://www.zerohedge.com/news/2014-10-03/4-5-top-job-additions-september-were-low-or-minimum-wage
Hourly earnings posted the first decline since July 2013 and productivity is stagnant.
Low Population Participation Rate Means Lower Unemployment Rate Because The Unemployed Is Spread Over A Smaller Base
Since the start of the recession in Dec 2007, 1.1 million jobs have been added and 13.3 million people have exited the labour force. (Source : Zerohedge)
The labour participation rate is at a 36 year record low (since 1978 http://www.marketwatch.com/story/labor-force-participation-hits-a-new-36-year-low-2014-10-03?mod=MW_story_latest_news) with more than 1/3 of America not in the labour force (92.6 million) even though it’s been a 232,000 person gain in employment and a 97,000 person decline in the labor force. http://blogs.wsj.com/economics/2014/10/03/behind-the-u-s-jobless-rate-more-job-gains-than-dropouts/
Contrast this to the UK which is running at a record high.
Hiring Grandparents Instead of Everyone Else
I was wondering if the reason is like as a Fed paper says due to the mass retirement of the baby boomer generation. Yet these charts blew that idea away because the employment gains are all in the “grandparent” category.
If that is not illustrative enough, how about this one.
Since the start of the depression in December 2007: 5.5 million jobs “gained” in the 55-69 age group. What about the core, 25-54 demographic? Negative 2.04 million.
Kids Are Staying In School Longer Because Of The Skills Mismatch
It is a fantastic idea because it means the kids are staying in school longer – Because they cannot get jobs ! and US high school drop-out rates is falling across the board.
Having kids stay in school is a good idea because the market is short of 1.4 million “skilled workers” who understand cloud and mobile.
At the same time, computer science is the most popular course in Harvard these days, with 12% of the entire college is enrolled in it.
I would imagine that this will lead to a huge problem in the future if the current trend of low quality jobs are created because college and high school graduates have higher aspirations than serving burgers.
Part Time Workers
In an earlier Bloomberg piece, it was reported that some 7.3 million people were involuntarily working part time in August. http://www.bloomberg.com/news/2014-10-02/yellen-s-job-slack-sticks-as-workers-languish-in-part-time-limbo.html
Source : RBS
These trends are not about to change anytime soon ! as we noted in February this year.
Link : Ad Hoc Commentary – commoditization of white collar work and the persistent rise of underemployment and unemployment https://tradehaven.net/market/ad-hoc-commentary-commoditization-of-white-collar-work-and-the-persistent-rise-of-underemployment-and-unemployment/
You see, the Fed and gang are all economists. They are PURE and cannot factor in anything but numbers in their game.
We are not economist and we can see the OBVIOUS – the world is moving towards automation and technological innovation.
Eg. Instagram had 13 staff when they were bought over by Facebook for US 1 billion. Contrast with Polaroid with 80 years of history, which went bankrupt in 2001 and 2008, and thousands of employees worldwide.
How long will Domino’s, which is mentioned as one of the many restaurants hiring staff in the Bloomberg article above, keep hiring workers when Chinese restaurants are now staffing themselves with robots with no overtime, no insurance and high productivity ? http://metro.co.uk/2014/08/18/the-future-is-now-and-its-terrifying-new-cafe-in-china-is-run-entirely-by-robots-4836700/
Drones are taking over delivery jobs as Amazon continues their test drone deliveries in their quest to automate. http://www.bbc.com/news/technology-25180906
Even analysts jobs are being automated to great success because biases are eliminated. http://www.ft.com/cms/s/2/dc895d54-a2bf-11e3-9685-00144feab7de.html#ixzz2x9PxwMKM
And just today we have the US Navy to deploy armed, robotic patrol boats. http://www.telegraph.co.uk/news/worldnews/northamerica/usa/11141904/US-Navy-to-deploy-armed-robotic-patrol-boats.html
Can we even imagine what it will be like when the drones take over ? The unemployment will be soaring in no time.
Link to related posts :
PART TWO : ENDER’S GAME, NOBODY WANTS TO BE A SERVANT
Part Three – I Am Not Crazy, Do You Watch Movies ? The Investment Ideas
Older workers will continue to work because the retirement age is being pushed ahead to 67 with Singapore the latest country to change legislation and people prepare to live to 95, at least for Koreans. https://tradehaven.net/market/wishing-you-a-long-long-life-a-bond-and-cpf-perspective/
What Does The Future Hold ?
I am an amateur at sociology, armed with just common sense at best and my common sense tells me something is not right.
Humans thrive on purpose and ambition, social order and ties.
Take away their dreams and hopes and discontentment will brew especially when social gaps widen as a result of economic policy like the current Zero Interest Rates because rich people can borrow more to buy more and companies that they owned get government bailouts as evidenced in this chart.
Now this does not apply to emerging economies, refugees and people who are living in the high poverty zones because their needs are at the base of the Maslow hierarchy which is subsistence.
I cannot predict how this end except that civilisations in the past have often proven that the slate gets wiped clean at some point.
As for the markets side of things, it is pretty obvious that the future holds a prolonged period of stagnating growth as consumption remains suppressed as employment gradually loses meaning and jobs will be lost to technology.
Low interest rates will prevail subject to shock periods like the period of Fed-shock we are living through now, exacerbating the stress of economic fear that transfers the power over markets into the hands of only the most powerful central banks of the world, rendering the smaller central banks essentially impotent.
That, I am afraid, will be the new normal.