Wall Street does not have a keen grasp of the abvious (Brett Arends)

Commentary: Five reasons Wall Street

 doesn't have a keen grasp of the obvious

By Brett Arends
August 10, 2010
BOSTON (MarketWatch) -- Has Wall Street taken the month off? Is everybody down in the Hamptons? That seems to be the only rational explanation for the market's placid response to Friday's jobs figures.

As of Monday's close, share prices were pretty much unchanged from Thursday.

If investors wake up and look at the fine print of the latest payroll data, here are five things that will make them gag on their mojitos:

1.) No, unemployment didn't remain steady at "9.5%". Can my fellow journalists please stop repeating this fictional number each month just because the Labor Department tells them to? It leaves out as much as it includes.

If we must grab just one number, at least use the "under-employment" rate, which counts such things as all those forced to work part-time flipping hamburgers because they can't get a full-time job. During the last recession it peaked at 10.5%. This time? It's 16.8%. And even that doesn't tell the full story.

2.) Another 181,000 people miraculously vanished from the labor force last month -- even though the population overall grew by 200,000. What is this, a creepy horror movie? In total, about 1.2 million workers have now "vanished" from the official labor force since April. Welcome to Shutter Island.

The explanation? Discouraged workers are leaving the labor force altogether. In the 1960s, they told you to "tune in, turn on and drop out." Today, the slogan is: Log off, tune out and give up. Worried about social stability? There are now 4.4 million men unmarried, unemployed men age 20 to 64.

3.) The headline job losses for July of 131,000 were bad enough. That was twice the consensus. But the Labor Department also revealed that job losses in June were a thumping 221,000 -- nearly 100,000 more than it had previously thought as well.

4.) Double dip? We may already be there.

Job losses in July were even higher, at 159,000, according to the Labor Department's second report, in which it surveys households instead of bigger companies. That follows cuts of 301,000 in June and 35,000 in May. "Historically," writes David Rosenberg at Gluskin Sheff, "the odds of seeing three whiffs in a row in this survey without the economy either being in a recession or quickly heading into one is 50 to one." Fifty to one.

5.) And what about August? The latest jobless claims jumped 19,000 to 479,000, a three-month high. Among the forward-looking indicators in Friday's numbers: Temp agencies shed 5,600 in August, the first drop since August of last year. As Mr. Rosenberg notes, the most bloated sectors of the economy -- construction, financials, and state and local government -- account for about a quarter of all jobs left. Just to keep us level, manufacturing will have to grow by 3% for every 1% those employers shed.

All of this, of course, comes as we pass the peak of inventory rebuilding and of stimulus spending. Contrary to the headline numbers, the stimulus was never very much anyway -- a third of the money went to tax cuts, and a third propping up the states. But now most of it's gone.

No wonder everyone's gone to the Hamptons. Should they come back after Labor Day?

Grandpa:

Thank you Brett Arends for yet another "call it like it is" recap of economic data. Unfortunately, you will not likely receive an invitation from the "First in business worlwide" cheerleading squad given your realistic and no spin delivery of fundamental economic data.

Two additional informative and straight shooting articles by Mr. Arends include:
The biggest lie about U.S. companies

The three biggest lies about the economy