Some choice tidbits from Gluskin Sheff’s David Rosenberg on this morning’s jobs report. The first two sentences really say it all, but if that only wets your whistle, we’ll lay a few rounds out for you.
This is no time to mince words. The U.S. labour market is in horrible shape. In fact, considering that policy rates are at zero, the Fed’s balance sheet has tripled in size (with more to come), and a 10% deficit-to-GDP ratio that would have even made FDR blush, the unemployment situation is an unmitigated disaster that deserves the government’s undivided attention. Instead of providing zero-percent mortgage financing to unemployed workers, which is only going to make them more vulnerable to credit conditions in the future, why not instead create conditions that will allow the economy to nurture a sustained pace of job creation. This may mean reducing the cloud of uncertainty overhanging the small business sector, including a second look at how the health care reforms are impeding employment growth, not to mention other supply-side measures such as payroll tax relief for the broad corporate sector.
it is against this backdrop of chronic excess labour supply that wages stagnated in September — less than a 1-in-10 event — for the second time in the last four months and why it is that a record 20% of personal income is now being derived from Uncle Sam’s generosity. Together with the flat workweek, total work-related pay stagnated, in nominal terms, in September. And, when one takes into account the near 1% rise in gasoline prices, which are in the process of heading towards $3 a gallon, that is a significant wage cut in real terms. Retailers that have bulked up on inventory this year in anticipation of a cheery holiday shopping season are very likely going to be embarking on another series of promotional and discounting programs to move the wares off the shelves.
In total, this report suggests that employers may have been holding their breath in anticipation of a recovery that is not developing and the clear risks are that we enter into a new phase of layoffs. The bottom line is that the employment data, in its entirety, have more double-dip thumbprints than many investors are acknowledging at the current time.