CONCLUSION: The US labor market remains in support of our view that economic growth is slowing domestically. Furthermore, the underlying trends in the data do suggest that President Obama’s odds of securing reelection are potentially lower than meets the eye.
Our call for US growth to slow – both directionally and relative to expectations – has been consistent since mid-MAR and this morning’s Payrolls miss is in support of our view. While the headline number of +80k MoM is indeed a sequential acceleration from an upwardly-revised +77k last in MAY, it does register as 20% miss relative to consensus expectations of a +100k gain.
While we remain unsure as to why the sell-side continues to attempt to forecast a made-up government number, we are sure that a +84k MoM gain in Private Payrolls (down from an upwardly-revised +105k in MAY) is an apples-to-apples signal that growth in the private sector is tepid at best. As an aside, it remains our longest of long-term views that US growth won’t meaningfully rebound without arousing the animal spirits of the private sector – something that cannot be accomplished amid incessant bouts of central planning. This is counter to the consensus view that our sovereign debt-laden central government is an integral part of the US economy that must not be reigned in – or else…
For more on this key topic of domestic fiscal reform, including our updated thoughts on the Debt Ceiling, Fiscal Cliff and the general election, please tune into our 3Q12 Macro Themes Call next Wednesday at 11:00am. Email for more details.
Jumping back to the JUN jobs report, the key takeaway from our analysis is that the US labor market remains firmly stuck in the mud, failing to improve or outright deteriorating on a number of key metrics:
- Non-Farm Payrolls, Net of Birth-Death Adjustment YoY: -43k from +138k
- Headline Unemployment Rate SA: flat at 8.2%
- Hedgeye-Adjusted Unemployment Rate SA (10YR Average Labor Force Participation Rate): flat at 11%
- Unemployed-to-Working-Age-Population Ratio SA: flat at 41.4%
- Labor Force Non-Participation Rate SA: flat at 36.2%
Not that anyone was expecting a major step forward, but it’s clear that the data firmly implies the US labor market remains far worse off than the headline Unemployment Rate (SA) of 8.2% would suggest. You know conditions are not good when an 8.2% Unemployment Rate is being touted as an indicator of “strength” on the incumbent’s campaign trail. Perhaps the populace buys it, perhaps they don’t; we’ll see come NOV 6th. For now, a rigorous analysis of the data (as opposed to overreacting to the headline print) would suggest that Obama’s odds of reelection may be less than indicated by various polls, as well as the latest reading from our Hedgeye Election Indicator.
All told, the US labor market remains in support of our view that economic growth is slowing domestically. Furthermore, the underlying trends in the data do suggest that President Obama’s odds of securing reelection are potentially lower than meets the eye.