Jobless Creation, Sort of

The Bureau of Labor Statistics came out this past Good Friday and said the amount of jobs created in March increased by 180,000. This pushed the unemployment rate down to 4.4% which is a 5 year low. The dollar was quite strong on this news. Wow, this seems so great, but let's read between the lines here.

Chuck Butler of the Daily Pfennig did just that. He had a lot of good things to say. First off manufacturing jobs, which is a forward looking indicator for the economy, dropped 16,000. So now we need to create 196,000 jobs.

Of that 196,000, 128,000, of 71%, were created via the birth/death model. In other words, retirement and death created the strong majority of jobs in the market. They jobs weren't created by economic growth. This is the explanation being that we can have an official GDP growth of 2.5% (unofficially I still believe it's negative), and a 5 year low in unemployment numbers.

These ideas are opposites. Let's look at this idea for a second. Remember that unemployment is at a 5 year low and wage levels are rising. The rise in wage prices is purely inflationary, but none the less at this point they are just rising. With an economy that absolutely rides the wings of consumer spending which represents 70% of GDP, how can this low level of unemployment and high wage rates lead to mediocre GDP growth? It doesn't correlate, and it shows why these job numbers are really bogus.

(Much of the data was taken from Chuck Butler's Daily Pfennig)