The top story this week is the July employment report from the Bureau of Labor Statistics -the BLS.  Wall St expected 100,000 new private payroll jobs created but this would be offset by losses in jobs from census workers, and from state, local, and federal workers of around 165,000. So on the whole, the market was expecting 65000 jobs lost.  What we got was:

• 71,000 new private payroll jobs created
• 143,000 census jobs lost
• 59,000 federal, state & local govt jobs lost
• TOTAL  131,000 jobs lost . Considerably more than 65,000 expected.

Here is what you need to keep in mind in considering these numbers -and in particular, the private payrolls number of 71,000. Normally, in a recovery, our economy is generating 200,000 – 300,000 new private payroll jobs per month, and a small number of government jobs. And since the last recession was particularly bad, we would expect a stronger recovery – if this were like every other recovery we’ve had in the past half century.  But it’s not.      Our economy needs to generate 125,000 new private payroll jobs a month to keep up with population growth and stop the increase in the number of people out of work.

The July employment report showed the initial claims unemployment rate remaining at 9.5%. At first blush that sounds like things are staying the same / not getting worse.  But that’s 14.6M unemployed Americans. If that were the end of the employment report, we’d just call it very poor and be done with it.  But here’s the part that doesn’t make the headlines – and this is probably the reason that markets did what they did on Friday. In addition to those 14.6M Americans on initial claims unemployment insurance benefits, there are:

• 6.6M people on long term unemployment insurance benefits
• 8.5M working part time but need full time work
• 2.6M want work but have used up their extended unemployment insurance.

This adds up to 17.7M Americans that need and want full time work but can’t find it.  But that doesn’t show up in the headline 9.5% unemployment figure.

Now add this 17.7M to the headline figure of 14.6M and you end up with over 32M Americans that want full time work but can’t find it. That’s over 20% the size of the labor force.   No recession since the 1930s has come anywhere close to this figure. In the Great Depression it was around 25%.
I don’t know why the mainstream financial press doesn’t discuss this figure of 32M Americans in need of work.  It paints the most complete picture.  Instead, they continue to present an incomplete and misleading picture. Let me illustrate via this simple example: say the unemployment rate drops. That suggests our economy is improving. But unless you have the rest of the information, you wouldn’t know the employment rate dropped because more people fell out of the unemployment insurance benefits system because their benefits have been used up, or if they found a job. There’s a big difference in those two reasons, but they both show the same headline statistic.
In housing, this week’s June report on pending home sales fell to yet another record low. This despite record low interest rates and prices close to 30% below where they were 3 years ago. So it will be a while yet before we work through the housing inventory at this rate. This slow-down in house sales will put further downward pressure on prices.

Connecting employment & housing:  Among many other things, what is different about this recession – I mean recovery — is the high unemployment rate combined with falling house prices. These 2 processes are in a bit of a feedback loop. By that I mean when 1 worsens, it worsens the other as well and increases the downward spiral. Case in point: an unemployed person won’t easily be able to sell their house and move to where a job may be. This is a phenomenon we didn’t have in previous recessions – I mean recoveries — and is particularly corrosive to the economy.