U.S. Jobs Market: What the Media and Government Aren’t Telling You
Today, all eyes will be focused on the February non-farm jobs numbers report. I will be keenly watching to see if the economy can churn out jobs in spite of the somewhat sluggish recovery in America and the weak demand from the European and Chinese economies.
The private Automatic Data Processing (ADP) Employment Change, which is more closely correlated with the more important non-farm jobs numbers reading, was positive at 198,000 new jobs created in February, but not overwhelming versus the upwardly revised 215,000 in January. The number beat the Briefing.com estimate of 150,000 jobs, but it was the lowest reading since October 2012. In fact, the ADP jobs numbers have declined in the last three straight months, which is not exactly a good sign.
The market needs to see the jobs numbers steadily improve. While we likely are far away from the 500,000 or so new jobs needed each month that indicate a healthy economy, we still need to see jobs growth to continue at close to the current level and for the unemployment rate to hold below eight percent in order to offer any hope of a sustained jobs recovery.
Chart copyright Lombardi Publishing Corporation 2013; data source: Automatic Data Processing web site, last accessed March 7, 2013
Yet the reality is the jobs numbers are not good. There are roughly 22.3 million or so Americans looking for work that are unemployed or underemployed and about 12.3 million fully unemployed. The fact is that these are not good jobs numbers, as many of these people are taking minimal wage jobs just to fight off the creditors and put food on the table.
The official unemployment rate is 7.9%, but I wonder about the validity of the jobs numbers as far as an accurate reflection of the nation’s jobs situation. My thoughts are that the unofficial unemployment rate is much higher than the reported rate. The reality is that the jobs numbers don’t include the millions of Americans that have dropped out of the labor force, tired of pounding the pavement to get shut out of jobs or working at minimum-wage jobs and losing confidence.
As I have said before in these pages, the millions of jobs that have vanished from the U.S. landscape to other countries, such as China, India, Mexico, and Latin America, are likely gone for good. The average hourly wage of factory workers in China was around US$1.36 per hour, which is much lower than the $23.32 in the United States. (Source: Kavoussi, B., “Average Cost Of A Factory Worker In The U.S., China And Germany,” The Huffington Post, March 8, 2012, last accessed March 7, 2013.) Moreover, the proposal to raise the minimum wage to $9.00 an hour will not help when competing against the much cheaper labor markets around the world.
So despite what the media and government tell you, the truth is in the numbers. At over 22 million unemployed, there’s a lot of work ahead of us. In my view, the weakness in the jobs market will continue to impact spending on durable goods, housing, and other expenses. Once interest rates begin to rise, unless we see major jobs creation, I expect to see a big impact on the economy. This is the reason why I question the housing market and stock market, and why I advise buyers to be cautious.