The labor/jobs data released yesterday were really grim. Worse than indicated by the headline number of 651,000 jobs lost in February. The prior two months were revised downward by 161,000 jobs. The birth-death model used by the BLS added a completely phantom 134,000 jobs in February, and a very mild February probably also boosted the number by an unsustainable few thousands. Therefore, realistic job losses were probably in excess of 825,000.
The total pool of unemployed soared by 851,000 to a record 12.5 million, up 5 million from a year ago.
These numbers have yet to be fully reflected in either consumer spending or further deterioration of quality of credit, from credit cards to installment debt, to mortgages and loans to businesses.
Here are some excerpts from the commentary of David Rosenberg and his economic research team at Bank of America Merrill Lynch :
“……….the number of full-time jobs sagged 940,000 in February after more than 1 million lost in both December and January – 3.5 million full-time jobs lost in just three months and 6.7 million since the recession began in late 2007. In a normal recession, we tend to see around 2.5 million full-time employment losses and currently we are nearly triple that and counting. These are jobs with benefits and because of their permanency; they have a tremendous impact on the household budget.”
“Judging by the leading indicators – 600,000+ jobless claims, Challenger (outplacement consulting firm Challenger, Gray & Christmas) layoffs up an eye-popping 158% from a year ago, the 78,000 plunge in temporary employment, the record-low workweek – suggest that we will have to endure an 800,000 employment slide when the March data roll out, and a 1 million loss cannot be ruled out.”
“……. lost in the headline payroll data is the severe degree of ‘underemployment’ that is occurring beneath the surface. You see, not all of those 940,000 full-timers got fired – 787,000 of them or 84% were pushed into part-time work involuntarily (but what choice do they have?). The number of people working part-time for “economic” reasons has surged a record 76% or 3.75 million in the past year ……”
“……those working part-time because they have no other choice now total 8.6 million and constitute a 5.6% share of the workforce – both at all-time highs. So, we have a situation where not only 1 in 11 homeowners with a mortgage are now either delinquent or in the foreclosure process, but we have 1 in 7 individuals who are either unemployed or underemployed.”
“…….we realize that we are in a whole new paradigm here. The extensive deleveraging as the credit excess and asset bubble of the last cycle continues to unwind is exerting a powerful negative influence on the real economy that it is far beyond our collective professional or personal experience.”
“We can understand the need to find something – anything – positive to say, but today’s employment report contained nary a hint of good news. 18 months into the credit collapse, even with a change in government with some of the best economic minds in the country, there is still no sign that we have adopted the policies that will stabilize the situation.”
I wish that I could say that David Rosenberg and his team are too pessimistic. I cannot. I am still waiting for some glimmer of light at the end of the tunnel. So are the markets.