Tags: TrimTabs | us | Jobs | Growth

TrimTabs: U.S. Only Adds 149,000 Jobs as Subpar Growth Lingers

Wednesday, 07 March 2012 03:19 PM

Take improvements to official unemployment rates with a grain of salt.

The U.S. economy added 149,000 jobs in February, down from its January estimate of 181,000, according to TrimTabs Investment Research.

The figures paint a different reality than official figures put out by the government.

Editor's Note: Wall Street Insider Exposes Death of Main Street America

TrimTabs’ employment estimates are based on an analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees, which the company claims to be more accurate than initial estimates from the U.S. Bureau of Labor Statistics.

Blame sluggish economic growth, weak salary increases and high fuel prices for the disappointing figures.

"To bring down the unemployment rate, the economy needs to generate at least 250,000 new jobs every month," Madeline Schnapp, director of macroeconomic research at TrimTabs, says in a statement.

"Job growth of 149,000 new jobs is not terrible, but it is also not a result worth celebrating either."

The figures are far lower than the Bureau of Labor Statistics latest jobs report, which found that the economy added a net 243,000 nonfarm payrolls in January. The headline unemployment rate stood at 8.3 percent in January from 8.5 percent in December.

The outlook doesn't look good, according to TrimTabs.

“Despite wishful thinking, the economy faces substantial headwinds from weak wage and salary growth, high unemployment, waning government support, contracting state and local governments, elevated fuel prices, and a sluggish housing market,” Schnapp adds.

Other private entities are coming out with their own figures, all of which serve as curtain-raisers to the official jobs report.

Automatic Data Processing, a massive outsourcing firm, reports that private-sector employment increased by 216,000 from January to February on a seasonally adjusted basis.

Employment in the goods-producing, services and manufacturing sectors all grew.

"This month’s employment gains in the ADP National Employment Report continue to be solid, with job growth averaging just over 200,000 for the past five months," Carlos Rodriguez, President and CEO of ADP, says in a statement.

"Also, for February, virtually every sector of the economy added jobs – something I hope will continue for the rest of 2012," Rodriguez adds

The government will unveil its unemployment data for February this Friday, and the report will include revisions to previous data.

Analysts' forecast show a range from 175,000 to 250,000 net nonfarm payrolls added to the economy, with the headline unemployment rate expected to remain at 8.3 percent or close to it, Yahoo Finance reports.

The problem with official unemployment figures, market observers say, is that those who jump out of the labor force aren't counted.

Only those actively seeking work can be considered unemployed, which brings the headline percentage lower, as the sea of people fed up with rejections aren't factored in.

Factor in those who have given up looking for work out of discouragement, and the figure comes closer to 13 percent says billionaire investor and Home Depot founder Ken Langone.

Excessive regulations on the part of the Obama administration are also preventing companies from hiring, which further discourages those out of work to send out resumes.

Langone tells CNBC he is "bothered by the fact that we aren’t creating a massive number of jobs in America. I think we are going to have a hardcore unemployment in America, and what do you do about that?"

"We’re at a point in time when...we’re creating regulations to punish people. When I’m getting punished for doing something, guess what happens? I’m gonna do nothing."

Others agree that the headline unemployment rate is not the only tool that should be used to gauge the health of the labor market

Barry Ritholtz, editor of the Big Picture blog, points out that not only do people leave and re-enter the labor force, but monthly jobs numbers are subject to revisions.

Several forward-looking indicators might serve as a better indicator of the health of the jobs market and economy rather than the lagging Bureau of Labor Statistics jobs report.

"The important thing with jobs is you look at the ongoing trends," Ritholtz tells Yahoo Finance news venue Breakout.

"Are jobs expanding, are people saying they are easy to get, are we seeing some increase in things like hours worked, wages paid, and temporary help? That group of three together tends to give you a little forward look."

Unemployment rates are clearly getting better, but investors need to step back and ask themselves the question:

"Does the trend continue? Was last month's improvement an outlier?"

If revised numbers remain healthy and if February number comes in at over 200,000 or even closer to 250,000, changes may be in store for the economy.

First it means that the Fed will likely stop seriously considering a third round of quantitative easing, an ultraloose monetary policy tool that seeks to push interest rates low and promote conditions conducive for hiring, with added inflationary pressures a chief side effect.

"Number two, you get another 200,000-plus jobs and you are going to see the GOP camp really pretty much start to think about 2016," Ritholtz says.

"It's an open race and the economy can change dramatically between now and then, but a couple of 200,000-plus jobs and that's almost the end of the election."

And lastly, the nature of the jobs created merits concern, as increased hiring among engineers is better than more low-paying jobs like hospitality workers.

Still, the Federal Reserve's loose monetary policies and government stimulus programs are wearing off, and although a slow-but-steady recovery from the Great Recession remains likely, the economy could suffer a setback along the way.

"Right now I am in the camp that a recession is a higher probability than most people think," Ritholtz says.

Editor's Note: Wall Street Insider Exposes Death of Main Street America

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Wednesday, 07 March 2012 03:19 PM
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