The “honest” Department of Labor reported last Friday (Sep 3, 2010) that the U.S. lost 54,000 jobs in August. Naturally the media who typically “toe the party line” and “don’t let the facts get in the way” spun this as great news. The stock market (S&P 500) jumped for joy at the “good news” and stock and options trading sent it up 1.3% that day. This reduced the volatility on options (as measured by the VIX), thus reducing the premiums for options trading. I, however, will try to let the facts get in the way and provide more realistic numbers, which come from the same department.
The 54,000 jobs lost in August reflect only those who lost and applied for unemployment benefits in August. 331,000 employees had to switch from full employment to part-time employment. The 54,000 lost jobs also INCLUDE a fictitious 115,000 “new jobs” that THEY ESTIMATED to be created by new businesses that started in August. So if we add up the numbers then 54,000 plus the 115,000 hocus-pocus fictitious new jobs and we really have 169,000 lost jobs. Add to that the 331,000 full time lost jobs and we have 500,000 FULL TIME jobs lost.
I am curious as to why the Bureau of Labor Statistics (a division of the Department of Labor) would include “wishful thinking” estimates of possible new jobs created instead of reporting the ACTUAL REAL numbers of jobs lost or created, unless of course it is political to skew the real numbers.
It’s interesting since many statistics that I read show that most new businesses fail within the first 5 years – even in a good economy which is not the case now. In reality, most new businesses, pretty much all small ones, will have as “employees” the owners and/or part time employees. Totally by coincidence, in the latest issue of Fortune Magazine there is an article about a REAL typical new startup business and what it spent in its first year. The employee costs amounted to a measly $19,800 for two PART TIME employees.
A week later, Friday Sep 10, 2010, the market is up another whole 5 points for the week or 0.5% on light volumes. Part of the low volumes could be attributed to the Jewish New Year holiday and the Muslim end of the Ramadan.
In summary, the August employment numbers, as skewed as they are, appeared to be satisfactory for stock market traders, options traders and index futures traders, sending the market prices higher and volatility lower.