"U-G-L-Y, you ain't got no alibi -- you're ugly!"
Reviewing Friday's employment update from the U.S. Bureau of Labor Statistics, the old schoolyard taunt leapt right to mind. Because the numbers were ugly -- just 36,000 jobs created in the month of January, a near-perfect reprise of what we saw two months previously in November's update ...
And because no, there's seems no alibi, no explanation, for the ugliness. I mean, didn't Automatic Data Processing tell us we created 187,000 last week? And didn't the all-knowing Wall Street Journal itself promise us at least 140,000 jobs, and perhaps as many as 155,000?
After all, as the Journal argued, "the ISM manufacturing survey just hit its highest level since 1973." Corporate profits were up 28% in Q4, and sales growth among S&P 500
Beep, beep, beeeeep! Jobs growth flatlines.
Except ... that's not the way it worked out. Instead of hiring, we continue to see layoffs. As banking profits surge, and the biggest names in banking emerge from under Uncle Sam's shadow, Wells Fargo
What went wrong?
Clearly, Americans are spending more. Clearly, we need jobs, and paychecks, in order to fund our spending. (Or do we?) The WSJ was only being logical when it predicted that with sales and profits up so strongly, naturally, jobs growth would follow. Here's where they went wrong:
- Sales: Sales growth comes from more people buying more stuff, true. But it can also come from the stuff you buy ... costing more. Last week's PMI index showed a 9% leap in prices manufacturers pay for their stuff. My guess: A lot of that inflation leaked into the reported "sales" gains.
- Profits: Profits arise from growing sales, true. But they also come from cutting costs -- and jobs.
In other words, what the pundits predicting strong jobs growth last week were really counting on to revive the economy was ... inflation and layoffs. Doesn't seem like a great foundation for building a recovery to me ... but what do you think?
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