Breakout

“You Want Fries With That?” Underemployment Remains Stubbornly High

Jeff Macke
Breakout

By now you know that today's edition of The Biggest Number Ever in the form of Non-Farm Payrolls came in much better than expectations. The economy added 236,000 jobs in February far exceeding the official estimate of 175k. The unemployment rate dropped to 7.7% compared to 7.9% last month.

Wall Street is applauding and the economy continues to improve, albeit at the slowest rate in history. But the headlines aren't the real story. According to Gallup polling the "Underemployment Rate" is near 18%. In the attached clip I ask John Canally the Investment Strategist and Economist for LPL Financial if improvement in the unemployment rate trumps the relatively low quality of the jobs themselves.

"The ratio of full time to part time jobs is still relatively high," Canally says. "The kind of jobs being added are not helping to push wage rates higher."

For Wall Street the sketchy quality of the jobs is all but perfect. The headlines are bullish but the reality is the Fed isn't anymore likely to back off QE today than they were yesterday. Even better, an increase in service sector jobs suggests more people going to stores and out to eat, bullish indications of improving consumer sentiment.

Retail and food jobs are good, honest, low-paying and relatively grueling. Per the BLS report in February of 2012 the economy lost 24,000 retail trade jobs but non-farm payrolls increased by 271,000. This year the numbers were gains of 23.7k in retail and 236k for total employment. In other words NFP came in lower than last February despite a net increase of almost 50k low-end or part time jobs.

It's better for the human soul to be working rather than on the government dole but low end jobs are unlikely to drive the recovery America needs no matter what today's headlines say.

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