Behind the optimistic headline news on jobs is the far more sobering fact that the United States lost 523,000 full-time jobs in June, the most in 20 years.

This was offset by a gain of 799,000 part-time jobs. No prizes for guessing why average wages have not risen much. This is fully consistent with the 2.9 per cent slump in GDP in the first quarter as firms move to more flexible and less expensive labor.

Weaker jobs market

The figures show full-time jobs tumbled by 523,000 to 118.2 million while part-time jobs rose by 799,000 to over 28 million. It’s a question of the quality of employment rather than the quantity. This is a weakening and not strengthening jobs market.

Unemployment figures remain at the creative edge of statistics. The official unemployment level is 6.1 per cent while if you add in the under-employed it comes to 12.1 per cent and a revision to the older statistical measures by ShadowStats puts it at 23.1 per cent in line with the Great Depression of the 1930s.

ShadowStats also reckons that the continuing high trade deficit should subtract one per cent from Q2 GDP. ArabianMoney believes the sudden reduction of the US federal budget deficit from 10 to three per cent this year is the main reason for the contraction in GDP, a huge ongoing adjustment that many economists seem to have largely ignored.

We recall meeting one senior economist late last year who saw it as a positive factor (click here). That struck us as a strange assessment at the time. The assumption that the private sector would fill the gap looked wildly optimistic and the impact on GDP has indeed been substantial.

Meanwhile US supermarket prices are rising, with prices of meat and dairy up 7.7 and 4.2 per cent respectively. Goldman Sachs recently forecast that rental prices will keep going up in the next few months. Yet average hourly earnings are up by just 23 cents since the start of the year.

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