8/8/19: Upbeat Jobs Reports Miss Some Real Points

Unemployment claims down, the weekly jobs report seemed to have triggered the usual litany of positive commentary in the business media

But all is not cheerful in the U.S. labor markets, once you start scratching below the surface. Here are two broader metrics of labor markets health: the civilian employment to population ratio and the labor force participation rate, based on monthly data through July:

The above shows that

1. Civilian labor force participation rate is running still below the levels last seen in the late 1970s, and the current recovery period average (close to the latests monthly running rate) is below any recovery period average since the second half 1970s recession end.
2. You have to go back to the mid-1980s to find comparable 'expansion period'-consistent levels of labor force participation rate as we have today. This is dire. Current recovery-period and President Trump's tenure period averages for labor force participation rate sit below all recovery periods' averages from 1984 through 2006. 

So much for upbeat jobs reports.

7/6/2012: Irish Services PMI - May 2012

­­In the previous post (link here) I covered manufacturing PMI, showing a slight lift up in the growth rate from 50.1 in April (stagnant economy reading) to 51.2 in May (sluggish, but growth). More importantly, the 3mo average for March-May 2012 stood at 50.9 (weak expansion) compared to 48.9 average for December 2011-February 2012 (contraction).

Today’s Services PMI paints a weak picture in the other 48% of the private sectors economy in Ireland.

Headline Services PMI fell to 48.9 (contraction) in May from 52.2 in April. This marked the first month of sub-50 reading since January 2012. 12mo MA is at 51.2 and 3mo MA is at 51.1 in line with 12mo MA, slightly below 51.7 average for 2011.

This suggests that 5 months in 2012, growth conditions remain challenging. January-May 2012 average reading is 51.0, which, if sustained through 2012 will imply Services sectors growth of close to, but worse than a 2.15% real contraction in Services in 2011. Not exactly what I would call good news.

Of course, there are loads of various caveats to the above analysis, so don’t take it as some sort of a forecast.

New Business sub-index deteriorated from 52.7 in April to 49.6 in May, posting first usb-50 reading since January 2012. 12mo MA for the sub-index is now at 50.1, in effect implying that new business activity has been stagnant over the last 12 months. 3mo average is at 51.5 and the previous 3mo average was 50.2, some improvement on December-February period is still present. Good news, current 3mo average is ahead of same period averages for 2010 and 2011.

In line with broader indices, employment sub-index has fallen to 49.1 – returning to sub-50 level after March and April departures from the trend. Thus, 12mo MA for employment sub-index is now at 48.0 firmly signaling contraction in jobs in the sector. 3mo MA is at 50.3 owing to 51.9 spike in March, while previous 3mo average is 46.6. Current 3mo average and May level reading are both below the 3mo average for the same periods in 2011. 

Meanwhile, the giddy happiness signalled by the Services sector Confidence indicator bubbled up from 64.1 in April 2012 to 64.3 in May. The indicator runs on a silly scale well off the 50=neutral stance. Give you an example, in 2010, the indicator averaged around 66.7 and in 2011 it averaged 64.8. In both years, Irish Services sectors were, ahem… in a recession.

Output prices continued to fall, with the rate of decline accelerating to 44.4 from 44.9 between April and May. 3mo average through May is now at 45.4 and the previous 3mo average is 45.7. This marks continuation of below-50 readings in output prices since July 2008. Meanwhile, input costs rose at a faster pace (51.4) in May than in April (51.0), with 3mo average through May at 52.5, against previous 3mo average of 54.3.

Predictably, profitability was shot, again. Profitability sub-index fell to 45.8 in May from 47.5 in April.

More on profitability and employment in the following posts as usual.

5/3/2012: Services & Manufacturing Employment - PMI data for February

In previous posts I have covered new data on Manufacturing PMI and Services PMI. In this post, I will look closer at Employment sub-indices by these two broad sectors.

As before, all original data is courtesy of NCB, with analysis provided by myself. Some of the indices reported are derived by me on the basis of proprietary models and are labeled/identified as such.

Chart above shows core PMIs for Services and Manufacturing, highlighting the following changes:

• Manufacturing PMI moved from 48.3 in January to 49.7 in February, remaining below 50 line, signaling weaker contraction mom. 12mo MA is now at 50.3 and Q1 2012 average running is 49.0 against Q4 2011 average of 49.1.
• Services PMI has improved from contractionary 48.3 in January to expansionary 53.3 in February, with 12mo MA at 51.0 below february reading. Q1 2012 running average is 50.8 and it is almost identical to 50.9 average for Q4 2011.
• Volatility of Manufacturing PMI had risen from the STDEV of 4.48 in 2000-present sample to 5.62 for 2008-present sub-sample (crisis period), while volatility of Services PMI had fallen from 7.75 in 2000-present to 6.60 in 2008-present.

The chart below summarizes Employment sub-indices for Services and Manufacturing PMIs:

• Employment index in Manufacturing has deteriorated from 49.5 (contractionary) in January to 49.3 in February, with 12mo MA now at 49.9, Q1 2012 running average of 49.4 and Q4 2011 average of 48.6.
• Employment index in Manufacturing has become more volatile during the crisis, with STDEV rising from 4.41 for the sample of 2000-present to 5.51 for the crisis-period sample.
• Employment index in Services has improved from contractionary 44.5 in January to still contractionary 47.9 in February, with 12mo MA at 47.7 and Q1 2012 running average of 46.2 against Q4 2011 average of 47.3.
• Employment in Services is less volatile since the crisis on-set, with STDEV of index running at 6.71 for the sample of 2000-present against crisis period STDEV of 5.64.
• Overall, Employment index in Services is virtually as volatile during the crisis period as the Employment index in Manufacturing. However, before the crisis onset, and historically overall, employment was much less volatile in Manufacturing than in Services. This suggests, given strong growth of our exports in Manufacturing compared to Services, that most of our current exports boom is explained not by real economic activity, but by transfer pricing - a conjecture supported by my analysis of the trade data here. Note, that this is also consistent with lower overall employment and lack of jobs creation despite the relatively strong singlas coming from the PMIs in both sectors.

Charts below clearly show that our 'exports-led' recovery is not creating jobs and is instead associated with overall net jobs destruction continuing to rage across the economy.

So what is going on? we can only speculate, but in my view, 


Reasons why our Services PMI growth is not translating into jobs creation are: 
(1) much of growth is due to transfer pricing via IFSC & likes, 
(2) Maj of services exports are not labour intensive (hours worked) but skills intensive (high-end skills generating high value added), 
(3) Domestic services continue to shrink (retail etc), 
(4) Profit margins are very severely strained - so profitability has ben shrinking since end of 2007 every month, implying cuts in employment to raise productivity, 
(5) Many of jobs in services exports are NOT employing domestic workers as lack of skills drives these jobs into international markets. And these are the growth areas, while domestic employment sectors are shrinking. 


Incidentally, this is not new. 


Since the beginning of data series, in Manufacturing, we had 33 months characterized by rising unemployment and rising exports (exports-led jobless recovery) against 43 months of jobs-creating exports-led growth. So there is a 43.4% chance that any recovery in Irish manufacturing will be jobless. This chance is much higher during the current crisis, with 20 monthly episodes of jobless recovery against just 8 jobs-creating recovery episodes.


Similarly, in Services, since the beginning of the data history, we had 31 episodes of jobless recoveries against 32 episodes of jobs-creating exports growth. So probability of 49.2% is associated with seeing jobless recovery if a recovery is exports-driven. Since the beginning of this crisis, there were 26 jobless exports-growth episodes against only 1 month when jobs growth coincided with exports growth.


The above, of course, show exactly how fallacious it is to anticipate exports growth to translate into jobs recovery.