Banro Corp. fka BAA

[desie0713]

The 38,000 job # could be reduced to negative growth due to over estimates

The job market went ker-plop in May, which should send new college graduates to the beaches instead of gainful employment, and their tuition-paying parents to psychiatrists.

Let me get right to the bad news. And then I’ll give you even worse news, so you’d better pull up a beach chair.

The Labor Department reported on Friday that the nation’s economy added only 38,000 jobs in May. The experts expected a modest gain of 150,000 jobs, so the actual figure is like setting off a bomb at a gas station.

May’s gain was not only well below the consensus but much lower than the previous two months, whose figures were revised sharply downward. In total, there were actually 59,000 fewer new jobs in March and April than previously estimated.

But it gets even worse than that.

Of those 38,000 new jobs the government said were created in May, only 25,000 were in the private sector, which means that if it weren’t for the fact that governments somewhere found money to hire people, then growth would have been reduced by nearly a third.

And it gets even gloomier than that.

As I’ve been telling you, springtime is when the Labor Department assumes that there are jobs being created by newly “born” companies that can’t be surveyed in the regular way. Washington guesses at how many jobs these new companies might be adding.

In May, the Labor Department added 224,000 of these make-believe jobs to the total before seasonal adjustments. After these figures are adjusted, the guesstimate probably added 40,000 or so jobs to the headline figure.

So the 38,000 number that you’ll see in the headline is very misleading. The economy probably lost a small number of jobs last month after this wild estimate is eliminated. Next month the government will probably revise the May numbers down significantly.

Indeed, the 59,000 downward revision to the March and April number is likely the result of the Labor Department correcting its assumptions for those months.

Curiously, even as the job market is weakening — each of the last four months has shown less gains — the Labor Department has been boosting its guesstimates this year with the presidential election in full swing.

Before the latest lull, job growth had been much stronger than the overall economy, puzzling many Wall Street observers. They’ve questioned whether economic data like the measurement of Gross Domestic Product might be inaccurate.

As I’ve been saying, it is the employment statistics that are inaccurate, mainly because of ineptitude in collecting the data and overly optimistic assumptions that make the job market look healthier than it really is.

Remember, the expansion of the job market is not only necessary but it’s also the natural state for any economy. In fact, it’s believed that job growth of 150,000 a month is necessary just to get new workers into the flow as well as absorb people who have been laid off.

May’s 38,000 new jobs won’t only destine new college grads to a summer of unwanted leisure, but it will also leave the rolls of the unemployed undented — although you couldn’t tell that from the craziest figure put out by the Labor Department on Friday: the unemployment rate.

Even as job growth stalled, the government said that the nation’s unemployment rate fell to 4.7 percent from 5 percent. That figure is so odd that even Pollyanna’s optimistic sister wouldn’t brag about it.

The May jobs report just blew away that cover and the possibility of a June rate hike seems to have evaporated.
As my readers already know, the unemployment rate is a perverse measurement of the economy because of the way it is calculated by the Labor Department. When people get so discouraged that they stop looking for work, they are no longer considered unemployed in the eyes of the government.

That’s what happened in May when a large number of people again left the workforce — and probably not because they are retiring en masse. That exodus also reduced the nation’s already low labor participation rate by another 0.2 percentage points.

It’s also interesting that the Labor Department chose to start its press release with the drop in the unemployment rate even though the weak job growth is really all that anyone was paying attention to.

The extremely disappointing job growth in May is already causing a lot of problems. For one thing, the stock market declined sharply on the number even though job growth was so bad that it caused grave doubts about whether the Federal Reserve will be able to raise interest rates in June.

The stock market doesn’t like rate hikes, so the job report would have been taken as good news if Wall Street wasn’t so concerned about the economy and the effect on corporate profits.

Janet Yellen’s Fed wants to raise rate and needs to raise them, but it can’t do so if the economy is looking too weak. Up until yesterday, the Fed seemed to have the go-ahead for a June rate hike because GDP, the broadest measure of the economy’s growth, seemed to be recovering from a horrible first three months of 2016.

And while the economy is far from booming, the GDP’s growth, an annual rate of around 2.5 percent in the second quarter, might have given the Fed enough cover to make its move.

The May jobs report just blew away that cover and the possibility of a June rate hike seems to have evaporated.

FILED UNDER CRUDELE , FEDERAL RESERVE , JOBS REPORT , UNEMPLOYMENT
SHARE THIS ARTICLE:

FacebookTwitterGoogleEmailCopy
READ NEXT Walmart wants to deliver groceries to your door

SPONSORED STORIES

Harry Dent Warns: "This Is Going To Be Worse Than 1931!"
Economy and Markets

Why 81% Of Employers are Looking to Offer Financial Literacy Programs
ADP Retirement

The Chilling Thing I Found Out About My Retirement Plans
The Huffington Post

Caddy’s Best-Seller is New and Renamed
Motor Trend

Class of 2017: New Cars Ready to Roll
Kelley Blue Book

The New 2016 Crossovers
Yahoo Search
Recommended by
AROUND THE WEB

The Drastic Measure One Producer Took to Keep SJP Thin
People.com

Clinton Should Concede to Sanders Before FBI Reveals Findings
Huffingtonpost.com

'Downton Abbey' Star's Fiance Dead at 34
Aol.com

Jared Fogle Divorce Documents Reveal Wife's Disgust Over Charges
Aol.com

The Fate of Will Smith's 'Independence Day' Character Revealed
EW.com

Shakespeare's Grave Scan Reveals Stunning Discovery
Aol.com
Powered By ZergNet
MOST POPULAR THIS WEEK 1
Why I had to escape my Ivy League life and disappear
Why I had to escape my Ivy League life and disappear
2
Inside Bill Clinton's relationship with his 'very good friend'
Inside Bill Clinton's relationship with his 'very good friend'
3
Murder victim's father goes nuts on serial killer in court
Murder victim's father goes nuts on serial killer in court
4
Johnny Manziel found in the first place you'd look
Johnny Manziel found in the first place you'd look
5
Teacher on the run after 13-year-old allegedly gets her pregnant
Teacher on the run after 13-year-old allegedly gets her pregnant
6
Disney execs in a panic over upcoming 'Star Wars' film
Disney execs in a panic over upcoming 'Star Wars' film
SHARE SELECTION

TRENDING NOW
IN BUSINESS
14,151
Ugly jobs report is even worse than it looks
Jewelry giant accused of swapping real stones for fakes
3,733
Ugly jobs report is even worse than it looks
3,097
Martin Shkreli hit with another criminal charge

COLUMNISTS
John Crudele Ugly jobs report is even worse than it looks
Ugly jobs report is even worse than it looks
Claire Atkinson Ugly jobs report is even worse than it looks
ABC News' Dan Abrams celebrates his 50th birthday
Keith J. Kelly Ugly jobs report is even worse than it looks
Tribune's former CEO Jack Griffin starts banking career
SEE ALL COLUMNISTS
NOW ON

‘Pure Nude Yoga’: Actual Workout Or Masturbation Material? (Answer: Sorta Both)
SEE ALL