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Now the Bad News: Those August Jobs Were Rented

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

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In the final analysis, the data show that the fiscally dependent jobs machine that was the source of America's faux prosperity during the past decade is now grinding to a halt And there isn't yet a shred of evidence that the long-standing job drought in goods production and core private-business services is about to end.

During the eight months of headline growth in the jobs count since December, nearly every significant component of the 68 million job interior of the US labor market has been static or still in decline. Thus, the 5.6 million job construction sector has shed 11,000 jobs per month since last December. This trend obviously has little prospect of reversing any time soon -- given current conditions in residential and commercial real estate.

Likewise, there's been no gain in the 4.5 million jobs in durable goods manufacturing. There's also been a further 100,000 loss from the 14 million jobs reported for transportation and warehousing, media and information, and FIRE (finance, insurance, and real estate). And there has there been no net gain in the professions and management categories. There were 9.24 million lawyers, accountants, engineers, architects, business managers, and consultants reported for August compared tot 9.25 million last December.

In truth, most of the 15,000-per-month pick-up for the entire goods-producing and core private-business-services sector has been in a handful of narrow categories that were hit especially hard by the sharp inventory correction that accompanied the economic downturn in late 2008. These inventory-sensitive categories include auto production and dealers, primary and fabricated metals, clothing and accessory retailers, and department stores. On a combined basis, they account for less than 8 million of the 68 million jobs in the economy's high-value interior but nearly all of the gain since December. Now with inventories replenished -- or potentially over-replenished -- there's no reason to expect a continued jobs rebound in even these narrow precincts

At the end of the day, the real mystery is why presumably numerate Wall Street economists and strategists have taken any comfort at all from the modest blip in the headline job count since last December. An economy that shed more than 8 million jobs during the two-year recession has now recovered the grand sum of 425,000 positions outside of the HES Complex, Core Government Operations, and the soon-to-be completed 2010 Census.

Among this miniscule total, there were 160,000 half jobs in the leisure and hospitality sector, and 200,000 jobs at temporary employment agencies. These are the lowest paying, least stable jobs in the entire economy, and can't conceivably serve as a foundation for the recovery of private incomes and spending.

Indeed, nominal private incomes are still a staggering $465 billion, or 5.2%, below the level reached on the eve of the Wall Street heart attack in September 2008. The August jobs report provides no evidence whatsoever that this fundamental obstacle to recovery will be ameliorated any time soon.
No positions in stocks mentioned.

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