The job market still stinks

Another curious payroll report masks ongoing deterioration.

By Anthony Mirhaydari Dec 7, 2012 2:51PM

Man reading job listings copyright Tetra Images, Tetra images, Getty ImagesSomething odd is happening at the Bureau of Labor Statistics. Over the last few months, the unemployment rate has fallen rapidly from 8.3% in August to just 7.7% now. For the average person not interested in the details, it seems like things are going gangbusters.

 

But for those who care, the underlying data is at odds with the jobless rate. And it suggests that not only is the job market not getting better -- it's actually getting worse. Here's why.

 

Back in October, I wrote about how the largest statistical outlier since 2003 was responsible for the pre-election drop in the unemployment rate to 7.8%. A surge of new jobs, many part-time positions, boosted the jobs reported in the household survey.

 

Friday morning, there was another curious result that used a different strategy to knock down the jobless rate. This time, it was a 540,000 rise in people out of the labor force -- which continues the waterfall decline in the labor force participation rate. At just 63.6%, it's already at levels not seen since the double-dip recession of the early 1980s.

 

 

There's more.

 

As the unemployment rate has improved over the last few months, the percentage of the population with a full-time job -- what I believe to be a truer measure of the health of the labor market -- has fallen from 47.7% to 47.3% and remains well below its pre-recession peak of nearly 53.3%. Back in the go-go years of the dot-com bubble, this measure nearly hit 55%.

 

 

 

More evidence was provided by Gallup, which conducts its own unemployment survey of households. It found that the unemployment rate surged nearly a full percentage point last month to 8.3%. That takes the jobless rate to levels not seen since May. Other measures, such as the percentage of those working part-time for economic reasons and the broader underemployment measure, also suggested significant weakening in the labor market.

 

And if you still don't believe me, then consider the huge drop in Friday's University of Michigan Consumer Sentiment Survey, which plunged from 82.7 to 74.5 -- well below expectations of 83. The future expectations component fell a whopping 13 points to 64.6, as people start worrying about the fiscal cliff/debt ceiling debate in Washington.

 

All of this suggests the economy is already stalling ahead of what will likely be a rocky 2013.
I continue to recommend investors adopt a defensive portfolio posture with a focus on safe havens like the U.S. dollar, Treasury bonds, and selected shorts such as Goldman Sachs (GS) and short ETFs such as the UltraShort Euro (EUO) -- both of which I've added to the Edge Letter Sample Portfolio.

 

Disclosure: Anthony has recommended GS short and EUO long to his clients.

 

I found these positions with the help of technical screens developed with Fidelity's Wealth Lab Pro back-testing tools, which you can find here. (Fidelity sponsors the Investor Pro section on MSN Money.)

 

Be sure to check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​om and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.


163Comments
Dec 7, 2012 4:21PM
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Just wait till Obamacare kicks in.  There may be an initial one to six month phantom improvement in the economy (because of the euphoria effect that often occurs when socialism is first implemented), but then watch out!  The economy could tank a lot.
Dec 7, 2012 4:20PM
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Even the dumbest politician should  see what's going on! And that includes most of them. Employers are hesitant about hiring because they have no idea what that ****  who is driving this train is going to do next and where he's going. And there is no point in hiring if the people are going to be layed off and taxes and insurance is going up, along with everything else. A mind is a terrible thing to waste.  hahahahaha

And about the recent increase in jobs (duuhhh), most if not all the new jobs are temporary for the holidays. They will probably be gone by the end of January, if not before.

MAYBE Bush got us into this mess, but OBUMMER hasn't helped the situation with all of his welfare supporters.

Dec 7, 2012 4:17PM
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Anybody really surprised by this great epiphany?


Guess who's been saying this for the last four years.............


Obama doesn't care. After all, he's got "more flexibility" now that the election is over!


5 1/2 weeks since Sandy, and nothing happening for the folks on the east coast


No worries! I hear Hawaii is nice this time of year!      MERRY CHRISTMAS!!



Dec 7, 2012 4:16PM
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With all the able bodied people on the obama handouts, unemployment is really over twenty five percent.
Dec 7, 2012 4:14PM
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