On the face of it this morning's job report looked great.
The economy added 171,000 new jobs, last month's numbers were revised up and even the uptick in the unemployment rate ticked higher but the labor participation rate also climbed.
While Gluskin Sheff's David Rosenberg thinks there was "more treat than trick" in today's report, he did see some ugly details as well.
Specifically, average weekly hours were down and so were wages earned.
Average weekly hours for production and non-supervisory workers declined 0.3 percent to 33.6 hours and weekly hours in manufacturing fell 0.3 percent to 40.5 hours.
The index of aggregate weekly hours only rose 0.1 percent for private sector workers and fell 0.1 percent for those in the production and nonsupervisory segment.
Moreover there was no wage growth, in fact average weekly earnings declined 0.3 percent.
"That has a certain deflationary feel to it and the price of labor should hardly be contracting if the jobs market is in fact returning to normal in any meaningful way," according to Rosenberg. "And remember we also saw in this week's Q3 productivity report that real compensation per hour fell 0.4 percent SAAR – not great news for the working class."
So, Rosenberg added that one shouldn't look at the jobs report and get too excited about the economy.:
"Headline employment aside, barring an upturn in productivity, the economy likely remained just as sluggish in Q4 – even adjusting for the Sandy Storm – as it was in Q3 where the true underlying momentum was south of a 1 percent annual rate.
Keep in mind that there are two factors of production – labor and capital. And in that labor component, there are two ingredients bodies and hours. We have more bodies, but not more hours. Even assuming a little more labor input, we already know that business investment and core capex orders are contracting simultaneously, which means in turn that the capital portion that goes into the supply-side measure of the economy is fading fast.
So to repeat, do not make the mistake of superimposing better headline jobs data with a better economy, especially if it means that productivity is eroding – a development along with revenue pressures that seems to be at the root of one of the hallmarks of the current corporate earnings season, which is declining productivity growth."
On a side note, Rosenberg also explained why president Obama isn't getting much of a bounce from this report. This is because for much of the demographic that might vote for Obama i.e. African Americans, Latinos, and 20-24 year olds, the unemployment rate actually increased.
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