Tomorrow morning, the Non-Farm Payroll number will be released. It’s the moment in time where the world’s fastest computer algorithms square off against each other to access the government number first and then launch market orders before someone else’s algo does the same thing. While the fireworks are going off at 08:30:01am, investors will be spending time to understand what the numbers actually mean.
In the past; you had to adjust the numbers for the government’s mystical ‘birth-death’ calculation which aims to guestimate how many small business jobs are created and occasionally lost. You had to adjust for the government’s own seasonal adjustments. You had to adjust for things like blizzards and hurricanes and then once the numbers were so horribly contorted to have no value, you had to figure out what it all meant.
When Mark Twain used to speak about “lies, damned lies and statistics,” it was obvious what he meant. In the end, government statistics are manipulated for the purposes of those in government. However, sometimes, even the guys in charge do not realize what their own manipulations mean. Sometimes, you really need to step back and think about why certain data sets act like they do. I’d like to propose a different meaning to the numbers that will be coming out over the next year or two.
As a result of the monstrosity that is known as the Affordable Care Act (Obamacare), there are unintended consequences. One of the most predictable of these is the provision that any firm with more than 50 employees must offer affordable health insurance to employees working for more than 30 hours a week. As businesses adapt to this rule, I would posit that many companies will now be adjusting the work-week to 29 hours. What do employees do who were expecting a 40 hour week? They get a second job and just like that, you get huge job growth.
Of course, you don’t tell your professional workers that they have a shorter week. Instead, you tell your unskilled labor about this. When you look at the payroll data, it isn’t hard to see the huge increases in jobs amongst unskilled, restaurant, bar and other lower paid workers. As this rule gets phased in, expect that this trend will accelerate. A whole lot of low paying jobs will be created, but the real jobs that drive the economy, the jobs that people actually want, are still quite scarce. Don’t be deceived by the numbers and the pundits. Stop a second, think about the ‘job creation’ and realize that a lot of these jobs were legislated into existence by Obamacare. The net result is lower productivity in the economy as workers spend more time in transit to their jobs, instead of actually working.
The actual job creation numbers in the US are still quite weak. Once again, numbers are there to be interpreted—make sure that you are the one who’s interpreting them for you.