Employment Situation Summary Analysis

Employment Situation Summary
Release Date: Usually the first Friday of each month
Release Site: www.bls.gov
Market Relevance: VERY HIGH
Management Value: VERY HIGH

To learn about the official release please follow:
http://www.blueworldassetmanagers.com/explanation.html

Friday, June 4, 2010

Blue World Employment Situation Analysis

Remember when I sent out a tweet that said don't listen to "experts" in the media when making important financial decisions because most headlines start with language along the lines of "analysts were surprised when..." What I meant to say is "listen to us." Some very big names were predicting anywhere from 450,000 to 600,000 new jobs for May. As an organization that saw virtually no potential for good job growth in the private sector we wondered "could we be that wrong? Unfortunately, NOPE. The unemployment rate fell to 9.7% but, so far, even the media does not seem to be trying to spin this as a good thing. Ironic, isn't it? The rate jumps in April and that was a "good thing." The rate falls in May and that is a "bad thing." Go figure.

As usual, the real truth is in the in the detail behind the headlines so let's take a look...

The overall rate fell .2% from 9.9% to 9.7%. Workers 25+ with a bachelor's degree or higher continue to be unemployed at historically unprecedented rates near 5% (4.7% in May). The rates for those without and with only a high school diploma also rose in spite of the summer-help hiring season getting started. That's not a good sign. The number of people reentering and first time entries to the job market also fell.

As we move to Table B (Establishment Survey) we can readily see the meaningful data. The economy added 431,000 paychecks. Ordinarily we'd say that's a good thing. The problem, however, is that of those 431,000 only 41,000 came from the private sector. The balance of 390,000 came from government hires. Worse, yet, is that the vast majority of those are temporary census jobs. One can argue that a job is a job but remember, the government's ability to be an employer is based completely in its ability to collect revenues from the private sector. If the private sector is not growing (GDP and employment says it's not) then it is only a matter of time before the government has to start laying off part-time and full-time workers.

The percentage of workers unemployed for 27+ weeks edged up, again, to 46%. That is over 6.75 million workers. Also troubling is that those unemployed for 5 week or less rose again. These are new job losses and earlier this week some major companies announced mass layoffs to come soon.

Manufacturing weekly hours worked and overtime remain predictably lackluster based on the GDP numbers but hourly manufacturing wages rose enough to notice.

Well, let's beat the same ole' drum. Blue World analysts do not see the catalysts necessary to drive a vigorous recovery. We, instead, perceive several major risk factors for continued and accelerating weakness, especially as we head into the second half of 2010 and Q1-2 of 2011 (Tax Season).

We remain in a very defensive posture with our investment strategies and will for the foreseeable future.

Thank you for reading and...stay tuned!

Release Site: www.bls.gov

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed. The official release site should be cross referenced for accuracy and footnoting. The analysis represents the opinion of Blue World Asset Managers, Ltd. who are not giving advice and does not warrant or guarantee predictions based on its analysis.