Friday's Ugly Jobs Report

Wow… You’d think the spinmeisters at the Bureau of (much be)Labor(ed) Statistics (BLS) could do a better job of putting lipstick on a pig than this.

At first glance, she looks well coifed and attractive. But when you lift the blouse a bit, there’s only one word that comes to mind – ugly. Miss Piggy ugly. Let’s examine the rolls on her belly…

  • 431,000 jobs added in May. Good start…except all but 20,000 of those added were Census jobs
  • State and local governments cut 22,000 jobs last month. The private sector added a 41,000, compared with 218,000 newly employed in April. This number is lower than ADP’s estimate of 55,000 issued yesterday. (Usually, the ADP figure is lower. So the revisions on these numbers next month are not likely to improve “the jobs picture”
  • On the BLS site, U-3 unemployment rate fell from 9.9% to 9.7%. The U-6 “underemployment” rate is down to 16.6%. Good news? Hardly. The numbers fell because 322,000 people dropped out of the labor force, reversing a trend that had been in place most of this year.
  • Next month, the “Census halo” comes off as the bureau starts letting go all those temporary workers. At least, that’s how it played out in 2000 and 1990. Maybe this year, they’ll get rolled into ditch work under the Orwellian-titled American Recovery and Reinvestment Act.

The reaction on Wall Street has been likewise frugly. The Dow and the S&P fell 1.6% in the first three minutes of trading. The employment report added to a double dose of bad news from Europe…

  • A senior member of Hungary’s ruling party is warning his country is on the same road to ruin as Greece without drastic measures. Up to this point, Hungary was on track to join the euro in 2014…
  • Rumors abound the big French bank Societe Generale is up to its armpits in derivatives losses. SocGen shares fell 6% in European trading

Hmmmn… Someone should have been warning people about the debt crisis building since the tech bust. Oh yeah, someone did… but those people were just “doom enthusiasts.”

Addison Wiggin
for The Daily Reckoning