I have been remiss in not quoting any Dolly Parton lyrics in my Real Money column for the past nine years, "Workin' 9 to 5, What a Way to Make a Living."
That brings me to this morning's non-farm payrolls report. I have often described analyzing these government releases as the least favorite part of my job, but it's part of my job, so here goes.
These numbers are, in a word, weird. If the labor market is so strong, why has the labor force participation rate not budged? From this morning's report:
The labor force participation rate, at 62.1%, and the employment-population ratio, at 60%, were little changed over the month. Both measures remain below their February 2020 values: 63.4% and 61.2%, respectively.
But in the midst of the Great Resignation, labor pricing - how much an employee is paid - is going nuts. Again from this morning's report:
In July, average hourly earnings for all employees on private nonfarm payrolls rose by 15 cents, or 0.5%, to $32.27. Over the past 12 months, average hourly earnings have increased by 5.2%. In July, average hourly earnings of private-sector production and nonsupervisory employees rose by 11 cents, or 0.4%, to $27.57.
Also in July, the average workweek for all employees on private nonfarm payrolls was 34.6 hours for the fifth month in a row.
Note, though, the second quote is from the Establishment Survey and the first quote is from the Household Survey. So, basically, the BLS "surveys" (ahem, ahem, loud throat-clearing to indicate my derision for unscientific crap) allows folks to figure out how many are filing for unemployment, the rate which is often quoted, and then surveys businesses (ahem, ahem...) to figure out how many new jobs are added and, crucially, what these employees are being paid.
This is in fact worthless government data. Albeit data that is loved by the mouth-breathers in certain financial media outlets. What these people are missing is what I am calling the Great Disconnect. Yes, I just coined a new term. Please cite me if you use it.
There is a fundamental disconnect between the supply and demand for labor in this country the likes of which I have never seen.
For example, Walmart (WMT) is laying off white-collar workers and so is Tesla (TSLA) , but these are not the folks who typically form the population of these surveys. Think back to Covid for a second. How many of your friends telecommuted, and how many of those telecommuters convinced you to do worthless, boring Zoom calls. In my case... all of them!
But, as Elon Musk noted, you can't build a Tesla via Zoom, and you sure as heck can't stock a Walmart store's shelves via Zoom. The surveys really only focus on a discrete segment of the population and miss what is happening among a huge set of the New Economy. These are what financial markets "guru" Cathie Wood calls Knowledge Workers.
That's not a value judgment. I grew up walking through iron foundries with my dad (not pleasant at this time of year, believe me) and I have been through enough auto plants on five different continents to know what it's like for folks who actually do a hard day's work. If some incredibly feckless capital-incinerating idiot doesn't consider them to be "Knowledge Workers," well, I don't give a damn.
But it is capitalism. I am sorry to say this, but when white collar workers lose their jobs, that has a disproportionate impact on the economy, but an inversely disproportionate impact on the government data, because those are not the people being surveyed. White collar workers are not paid based on the number of hours they work, and the BLS surveys are confused by this metric. It is easier to lay someone off from a Ford plant than from Ford headquarters in Dearborn. When that call from HR comes for a white collar worker, though, she's not coming back when things "pick up."
Watch corporate actions and ignore corporate words. Read real research and ignore government data. It's enough to drive you crazy if you let it...but I don't.