The Economy: Karl Denninger, "A Jobless August"

"A Jobless August"

by Karl Denninger

"One word: Yuck. Nonfarm payroll employment continued to decline in August (-216,000), and the unemployment rate rose to 9.7 percent, the U.S. Bureau of Labor Statistics reported today. Although job losses continued in many of the major industry sectors in August, the declines have moderated in recent months.

We got another problem here too: In August, the average workweek for production and nonsupervisory workers on private nonfarm payrolls was unchanged at 33.1 hours. The manufacturing workweek and factory overtime also showed no change over the month (at 39.8 hours and 2.9 hours, respectively).

If you remember last month I talked about this being modestly positive, in that we had seen a 1/10th hour uptick in workweek. That has now stalled, negating the potential for that signal. This, by the way, is why I require a three-month continual improvement before calling a turn in this indicator. While this didn't tick back down it has stalled and as such we're back in "no signal" from "impending signal" mode; a downtick next month cancels the potential "positive."

The change in total nonfarm payroll employment for June was revised from -443,000 to -463,000, and the change for July was revised from -247,000 to -276,000.

So June was better but July was worse, which means that today's numbers aren't better than the original July report - it is flat (29,000 revised has to be added back and then compared to the original report, so we're 245k .vs. 247k - statistically zero change.)

The issue here is the unemployment rate continues to rise. The incipient "improvement" has now been canceled, which unfortunately extinguishes the expectation of "imminent recovery."

What I really don't like is the U-6 number, which ticked up on a seasonally-adjusted basis by a full five tenths to 16.8% after falling back two tenths in July. This implies strongly what I suspected - that seasonal (e.g. hospitality, etc) hiring in fact was reported in July (hired in June) and now we're seeing it come back off, and that the excess movement was greater than the seasonal adjustment - in other words, the "apparent improvement" was a Chimera rather than reality.

This is consistent with how my general thesis has unfolded: There has been no real economic recovery; the uptick we have seen thus far has been driven by government spending and distortions rather than actual private activity improvement.

My thesis remains: There is not and will not be true economic recovery on a sustainable basis until the credit intermediation system is truly fixed, and that cannot happen so long as the lying continues. The sooner the government recognizes this and forces "The Bezzle" out of the system the sooner we can find a true, durable bottom. The longer the deception goes on the worse the damage to the economy that must be absorbed before recovery can take place."

- Karl Denninger, http://market-ticker.denninger.net/

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