For Anyone Paying Attention -- June 3, 2016

Updates

June 4, 2016: the dog that didn't bark. 

Later, 3:36 p.m. Central Time: even the LA Times called the jobs report today "shocking" -- the headline: Five things we learned from the shocking jobs report today. Here they are:

• it all started with George W. Bush
• Obama is doing his best to turn this around
• Hillary will get the job done
• Trump will make things even worse
• the California beaches will be really, really busy this weekend

The lede:

Anemic job growth of just 38,000 in May -- the worst in more than five years -- shocked analysts, triggered warnings about the state of the economy and most likely derailed a Federal Reserve interest rate hike many had expected was coming this month.

But economists cautioned not to overreact to a single bad jobs report – even the stunningly bad one released by the Labor Department on Friday.

“It’s kind of a yellow flag, I wouldn't call it a red flag,” said Stuart Hoffman, chief economist at PNC Financial Services.

“It’s not time to panic,” he said. “These numbers are quite disappointing but not decisively recessionary or a sign that the economy is down and out.”

Still, the weak numbers bolster Republican arguments that President Obama and his fellow Democrats haven’t been able to fully revive the economy after the Great Recession.

And what did the LA Times blame the shocking report on: the Verizon strike (which is over).

Then they blamed it on global warming, or as they put it, the "mild weather":

Mild winter weather in much of the country could have led to earlier-than-usual hiring by construction companies, which pushed down May hiring. In February and March, the industry added 50,000 net new jobs, compared with just 20,000 for the same months the year before.

I can't make this stuff up. [The LA Times conveniently forgot to mention that job growth in March and April was also pathetic -- just not as bad as the May numbers.]

Later, 3:32 p.m. Central Time: I see that four hours ago Yahoo!Finance had this story -- "everyone" was wrong on today's job report:

We went searching for an economist who came close to predicting the surprisingly low number of jobs created in May – 38,000. We couldn’t find one.

Bloomberg surveyed 81 economists on their predictions for the nonfarm payroll number for May, the closely watched figure that represents the net number of new jobs. The average prediction was for 161,000 new jobs, which turned out to be 123,000 too high.

The forecasting department at National Bank of Canada came closest, predicting 90,000 new jobs. Next was University College, Dublin, at 92,000, followed by German online banking firm Berliner Sparkasse, at 100,000. The top three guesses came not from renowned Wall Street banks but from non-US organizations.

The difficulty of forecasting becomes apparent when something unusual happens, which clearly seems to have happened in the labor market in May. Everybody was aware of a big strike at Verizon that was expected to pull down the overall number by 30,000 or so. Something more than that was obviously going on, and what, exactly, may not be apparent for months. If ever. [Subtle hint: OBAMACARE.]

Later, 3:25 p.m. Central Time: finally. Yahoo!Finance says this was posted two hours ago, so that would make it about 1:25 p.m. Central Time. Finally someone woke up. My hunch is that the writer knew the story at 8:30 a.m. this morning when the numbers came out, but the spinmeister puppeteers had to figure out how to release the story, and then "when" to release the story. Finally, near the end of the trading day Yahoo!Finance uses the word "shocking" to describe the jobs report AND notes that analysts missed it by a mile, although they did not say exactly that. By the way, this was part of the first comment (obviously this guy is paying attention):

For a long time there's been a metric of 150K-180K jobs per month needed in order to keep up with the growth of the population.

Yet here we are with yet another month that falls well short of that but the unemployment number goes down??? They just keep subtracting people from the workforce to make their numbers work.

And yet again the [mainstream] media doesn't say a word.

Later, 10:00 a.m. Central Time: people dropping out of the work force, but US factory orders surge; up 1.9%, best in six months. 

Later, 9:31 a.m. Central Time: wow, from "El-Erian." And this is an expert? No analysis whatsoever. His only conclusion: confusing. The spinmeisters are unable to really say how bad this report was. This was an incredibly bad report, and as the hours tick by, people are going to realize how awful this report was. Confusing? I don't think so. The "jobs numbers" have simply caught up with reality. O.B.A.M.A.C.A.R.E.H.I.L.L.A.R.Y.W.A.R.O.N.F.R.A.C.K.I.N.G.

Later, 8:42 a.m. Central Time: as the numbers begin to sink in, the market begins to sink. The market was positive/green prior to the opening. The jobs report was released at 7:30 a.m. Central Time, and immediately, futures turned negative/red -- slowly at first, but now, nearly a triple-digit fall. By 11:00 a.m. the numbers will be "old" news, the spinmeisters will "correct" things, and the market will get back to whatever it was going to do before the jobs report even came out.
 

Original Post

 

It appears Zero Hedge has the best "first analysis":

If anyone was "worried" about the Verizon strike taking away 35,000 jobs from the pro forma whisper number of 200,000 with consensus expecting 160,000 jobs, or worried about a rate hike by the Fed any time soon, you can sweep all worries away: moments ago the BLS reported that in May a paltry 38,000 jobs were added, a plunge from last month's downward revised 123K (was 160K).

The number was the lowest since September 2010!

The household survey was just as bad, with only 26,000 jobs added in May, bringing the total to 151,030K. This happened as the number of unemployed tumbled from 7,920K to 7,436K driven by a massive surge in people not in the labor force which soared to a record 94.7 million, a monthly increase of over 600,000 workers.   

As expected Verizon subtracted 35,000 workers however this was more than offset by a 36,000 drop in goods producing workers. Worse, there was no offsetting increase in temp workers (something we caution recently), and no growth in trade and transportation services.

What is striking is that while the deteriorationg in mining employment continued (-10,000), and since reaching a peak in September 2014, mining has lost 207,000 jobs, for the first time the BLS acknowledged that the tech bubble has also burst, reporting that employment in information declined by 34,000 in May.

The change in total nonfarm payroll employment for March was revised from +208,000  to +186,000, and the change for April was revised from +160,000 to +123,000. With these revisions, employment gains in March and April combined were 59,000 less  than previously reported. Over the past 3 months, job gains have averaged 116,000  per month.

I think the biggest story -- and what needs the most explanation -- is the drop in tech hiring.

Record 94.7 million Americans not in labor force:

• incredible safety net (disability insurance, unemployment insurance, social security)
• tectonic shifts in tech
• ObamaCare
• $15/hour minimum wage
• reports from California: "impossible" for small companies to operate
• trickle down estates: the "best generation" -- those who were 16 years old to 40 years old during WWII -- now leaving their estates to their children and grandchildren; that generation was the first US generation to leave money to their children