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Something Amazing is Happening With the Payroll Figures

The February non-farm payroll showed a further loss of 36,000 jobs, versus an expected loss of 75,000, and the unemployment rate remained unchanged at 9.7%. December was revised up by 41,000 and January was revised down by 6,000, so netting everything out there was essentially no change. Those hired now exactly equal those fired, about 3 million a month. There were continued big losses in construction, and decent gains in temps. This month I decided to take advantage of former Labor Secretary Robert Reich’s course on labor statistics which I took at UC Berkeley, and dig through the supporting data at the Bureau of Labor Statistics website (click here for the link at ). Something amazing is happening. There is a barbell effect in the labor markets which no one seems to see, which is rendering the aggregate payroll figures meaningless. There is a barbell effect taking place, where the 40% who have been jobless for more than six months, who worked in the bubble industries of real estate, housing, and  construction, are never going to see their jobs come back. The 60% who are short term unemployed, who recently lost jobs in finance, accounting, and health care, are getting rehired very quickly. In fact, 20% of the jobless are getting rehired in only six weeks. There is another effect at work. While the employment rate for those with no high school diploma is 16%, the kind of worker who lost their manufacturing jobs to China, the jobless rate for those with college degrees is only 4.5%. This is proof that the dying sectors of the US economy is delivering the highest unemployment rates, and that America is clawing its way up the value chain in the global race for economic supremacy. It is what America does best, creative destruction with a turbocharger. There is a third influence here, which could be huge. The BLS only contacts existing businesses for its survey. It doesn’t survey companies operating out of someone’s garage in startup mode. Given the huge ongoing dislocations in our industrial structure and the incredible advances in software, the Internet, and cloud computing, this could be one of the biggest job creators of all. So far, it is not being counted at all. The bottom line is that payroll figures are much better than they appear at first glance. Red Alert! The markets don’t know this.