Hooray, more people are working but after inflation, on average, how much more is the average person taking home?
Note that it is real (inflation-adjusted) income that counts for GDP.
The squawking parrots are out today trumping up a major jobs “beat the street” jobs number without looking at any of the key details.
The BLS reports that jobs rose by 339,000 in May.
Hooray?! Few bothered to read the entire report that showed employment fell by 310,000.
Payrolls vs Employment Since May 2022
- Nonfarm Payrolls: +4,063,000
- Employment Level: +2,422,000
- Full Time Employment: +1,734,000
Follow the Yellow Line
Of the 894,000 rise in employment in January, 810,000 was due to annual benchmark revisions. And the BLS does not say what months were revised, just poof, here you go.
Thus, we do not even know what months to attribute over half of that 1.7 million gain in full time jobs.
Just Noise?
One widely respected analysts I follow on Twitter has labeled the discrepancy between jobs and employment as noise.
Really? Does noise last this long? And what about income?
Gross Domestic Income GDI Suggests the US Is in Recession Right Now
Two Measures of the Same Thing
Gross Domestic Income (GDI) and Gross Domestic Product (GDP) are two measures of the same thing. But they radically differ in outlook.
On May 25, the BEA released the second estimated of first-quarter 2023 GDP. The GDP rose from +1.1 percent to +1.3 percent.
The BEA does not release GDI in the advance estimate, but does in the second estimate.
GDI was -2.3 percent in the first quarter of 2023, and -3.3 percent in the fourth quarter of 2022.
Corporate Profits
- Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $151.1 billion in the first quarter.
- Profits decreased of $60.5 billion in the fourth quarter.
- Profits of domestic financial corporations decreased $25.4 billion in the first quarter, compared with a decrease of $59.0 billion in the fourth quarter.
- Profits of domestic nonfinancial corporations decreased $109.3 billion, compared with a decrease of $22.9 billion.
- Rest-of-the-world profits (net) decreased $16.4 billion, in contrast to an increase of $21.4 billion.
Which Set of Numbers Do You Believe?
The divergence in the jobs data, and a weak rise in full time employment fully explains negative real GDI.
More people are working, but real (inflation-adjusted) income is another matter.
So, if you woodenly believe these GDP numbers, I suggest you are in for a major surprise.
What Does Trucking Suggest?
Like many FreightTech companies that have laid off workers in recent months, CloudTrucks blames the declining freight market for the job cuts.https://t.co/zyfDCIgnES
— FreightWaves (@FreightWaves) June 1, 2023
No Recession?
Recession update: Here’s the update of the monthly indicators that the NBER analyzes in figuring out if the economy is in a recession. (It’s not.) pic.twitter.com/3wMfoFn7dK
— Justin Wolfers (@JustinWolfers) June 2, 2023
Those who believe these divergences will last all the way to 2024 and there will be no revisions to the numbers can put their faith in the above chart.
Revisions Coming
For many months I have been calling for major negative revisions.
One other person is ringing the same bell.
I happen to agree with @FreightAlley
It’s unheard of to see so many data points not at recessionary levels but at recessionary TROUGHS with an unemployment rate at cycle lows
84% of states have rising ranks of continuing claimants per today’s @USDOL@BLS_gov revisions incoming https://t.co/2KmYgZOSvD
— Danielle DiMartino Booth (@DiMartinoBooth) June 1, 2023
“BLS revisions incoming.“
Indeed.
More importantly, BEA (GDP) revisions coming to match GDI.
Expect a Long Period of Weak Growth, Whether or Not It’s Labeled Recession
Yep, I have been calling for a recession. And I was early. But I have been calling for a “weak” recession, as well as one with a relatively small rise in unemployment.
Flashback August 19, 2022: Expect a Long Period of Weak Growth, Whether or Not It’s Labeled Recession
Lost in the debate over whether recession has started, is the observation that it doesn’t matter much either way.
It’s payback time for three consecutive bubbles. Expect a long period of weak growth, no matter how it’s labeled.
This time there will not be bailouts. Nor will the Fed quickly reverse on interest rate policy out of fear of stimulating more inflation and unwanted demand.
And I have been touting relatively strong jobs in this recession.
Countless times over the last six months I heard jobs are are too strong for there to be a recession.
Such talk is nonsense.
We may easily see three or four quarters of negative GDP with relatively strong jobs because we never fully filled the losses from the pandemic.
Might We See a Minimal Job Loss Recession? Why Not?
March 21, 2022: Might We See a Minimal Job Loss Recession? Why Not?
What if instead of firing millions of leisure and hospitality workers, the openings vanish?
- The housing bubble “Great Recession” suffered immense job josses with a very slow job recovery.
- The double dip recessions in the 1980s had small job losses and speedy recoveries.
I expect the next recession to look much more like the 1980s inflationary recessions than the housing bubble “Great Recession”.
It’s amusing that I am getting taunts out of the blue today about “strong jobs” when the underlying details in jobs report (full time employment and hours worked) are both quite weak.
The report shows a huge drop in employment of 310,000 and a return to massive divergences between jobs and employment.
And that has been my call all along, well in advance, since March 21, 2022. To top it off, I even have a token bragging rights bet on a minimal rise in unemployment this cycle.
Deal
If the unemployment rate hasn’t crested 5% before March 1 next year, pizza & beer are on me
For the good of our fellow Americans, I hope you win the bet
— Adam Taggart (@menlobear) March 1, 2023
People come marching in on my blog out of the blue with taunts and they have no idea what my position is on the unemployment rate. Adam hopes I am right.
Huge Jobs Divergence Returns, Jobs +339,000 but Employment -310,000
For discussion of today’s job report in detail, please see Huge Jobs Divergence Returns, Jobs +339,000 but Employment -310,000
The BLS Wonderland reporting is back with a vengeance today as jobs and employment head in opposite directions and the unemployment rate jumps.
Gross Domestic Income GDI Suggests the US Is in Recession Right Now
For more details on the discrepancy between GDP and GDI, please see Gross Domestic Income GDI Suggests the US Is in Recession Right Now
Gross Domestic Income (GDI) and Gross Domestic Product (GDP) are two measures of the same thing. But they radically differ in outlook.
Nothing is Normal!
As Craig Fuller AKA FreightAlley says, “I don’t think anything is normal about the current cycle we are in or the COVID cycle we just came out of. The world is drastically different now.“
So, recession or not, this economy is not exactly normal. And it may easily stay that way for a long time.
The Fed cannot goose the economy to halt a recession given its fears, well founded or not, of stoking inflation.
This is payback for three consecutive bubbles. Meanwhile, the economic cheerleaders seem oblivious to the entire setup.
This post originated on MishTalk.Com.
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