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Now the Bad News: Those August Jobs Were Rented


Despite what some on Wall Street say, the August jobs report shows little hope for recovery.

Hard upon the release of Friday morning's non-farm payrolls, the Wall Street Journal's online headline proclaimed "Private Sector Adds 67,000 Jobs." In fact, 40,000 of the 60,000 non-Census jobs gained in August were in the HES Complex (health, education, and social services) and Core Government Operations (excluding the post office). These jobs are overwhelmingly funded out of the public exchequer, not private resources. And in today's red-ink-ridden world this means these incremental payroll slots were, in fact, deficit financed. So last month -- just like since the beginning of the alleged jobs recovery in December -- the American economy didn't actually "create" many new jobs; it just rented some from our grandchildren.

Moreover, the remainder of the reported 60,000 non-Census job gain was accounted for by the leisure and hospitality sector (+16,000). The fact that more bellhops are drawing paychecks is a good thing. But these positions clock only 26 hours per week, or about 70% of the average, and they pay $13 per hour compared to the private-sector average of about $23 per hour. Consequently, average weekly pay in the leisure and hospitality sector is $339, or just 43% of the $775 figure for the private sector as a whole. So call these (not quite) half jobs.

The larger point is that paint-by-the-numbers Wall Street bulls are completely ignoring the quality, composition, and sustainability dimension of even the anemic headline job gains being reported. Consequently, they fail to see that "fiscally dependent" job gains -- which account for a high share of the uptick since December, and, more importantly, all of the American economy's job growth for the entire last decade -- will soon dry up. We're fast approaching a limit that might be called Peak Debt.

At the same time, jobs in the heart of the private economy -- goods producing and core private business services -- have hardly rebounded at all, and have been shrinking relentlessly since January 2000. Way back then, the Bureau of Labor Statistics reported 76.8 million of these better-paying and more skilled jobs in manufacturing, construction, retail/wholesale, information/media, and professional and business services. By August 2010, however, this figure had shrunk by 11% to only 68.3 million jobs.

Here's what happened along the way, and it's a tale of profound weakness in the nation's economic fundamentals. These realities make a mockery of last week's specious good-news chatter about the headline uptick in the August numbers.

Start with the peak-to-peak result during the Greenspan Credit Bubble -- from January 2000 to December 2007. Notwithstanding the robust boom in housing and consumer spending from home ATM machines during this seven-year period, we actually had a net loss of 500,000 jobs in these high-value categories. Moreover, this growth-free segment of the national economy had accounted for nearly 60%, or 77 million, of the 131 million non-farm payrolls reported in January 2000.

Next came the two years of severe job losses during the Great Recession beginning in December 2007. By the time we hit bottom in December 2009 -- if we actually did -- nearly 8 million (11%) goods-producing and core private-business-service jobs had been wiped out. This amounted to a loss of 330,000 jobs per month from categories that account for upwards of 75% of the American economy's payroll dollars.
No positions in stocks mentioned.

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