Jobs: Who's Smoking Those Green Shoots?

by: Karl Denninger

Grrrr.... after hearing packs of lies all day on "Tout TV" regarding the radically worse-than-expected employment report, and on the back of my own report on the data, I am compelled to post some CHARTS.

Let's start with this one:

Note that all of these are from the BLS "A" tables - that is the actual count of people from a survey, not the cooked, "birth-death-adjusted" nonsense that BLS calls a "headline" number.

This first chart shows the bad news - the blue line is monthly change from the previous month. It is very noisy, as you'd expect.

The solid line is annualized change - that is, the actual count compared to one year prior.

Notice that employment went to a negative 12-month rate of change right at the start of 2008 - coincidentally, right at the start of the official "start" of the recession.

Also note that the last recession, which began at the end of the first quarter of 2001, also had the rate of change on a 12-month basis go negative at roughly the same time.

(Not-so-coincidentally, you also got a 12 month advance warning of the recession when the trend changed in both cases too. Now you know what one of the indicators I used in my 2008 "Outlook" Ticker in which I said we would enter a formal recession was.....)

I want to to pay particular attention to the bottom of the last recession, which was (officially) 11/01.

Notice that the spike bottom in the second derivative, that is, when the rate of change on a 12 month basis turned, was almost exactly when NBER called that recession (in retrospect) "over".

Has the second derivative turned in the table at this point on an annualized basis? NO.

First question: What does this say about the calls that "the recession is over"?

You will also note that in terms of the 12 month rate of change this recession is more than three times as severe in its impact on employment as was the 2001 recession. In fact, "by the numbers" we have 8,236,000 fewer people employed now than we had at the peak in July of 2007.

It is, however, worse than it first appears. Here's the second chart, and this is the chart that, if you're sentient, should be sending cold chills up and down your spine:

Again, the monthly change data is in light blue, the annualized in red.

This chart shows that since 1999 (the furthest back I have ready access to the BLS data in easy-to-chart form) the number of persons that are not in the labor force has continually risen on a 12 month trend basis. While it has reached "zero" on two occasions and gotten close once more the number of people in the country but not in the labor force continues to rise.

If we were a "gentifying" population this would be bad. But the boomers are not yet starting to retire in significant numbers; at present we are adding about 150,000 "working age" people to the population each and every month, or about 1.8 million annually.


This is an unmitigated catastrophe, and it did NOT abate during the so-called "economic expansion" of the 2000s. If that was a true economic expansion - that is, driven by people going to work and earning a productive living - then the "NILF" numbers would have contracted on a 12 month trailing basis during that so-called "expansion."

They did not, which means the so-called "expansion" didn't come through productive labor.

To put this in context, unless this number is at -1800 (or less) we are not "absorbing" the new workers that come into the market - that is, while we "lost" 8.2 million jobs in this recession thus far we have also managed to stuff at least twice that many more people of working age who aren't working into this country in that same amount of time, and none of them show up in the official "unemployment" statistics because none of the people in the "Not In Labor Force" bucket are "looking for work."

If that "expansion" did not come through productive labor, where did it come from?

Do I REALLY need to put this graph up again?

What comes next?