Headline employment figures had been displaying a far better indication of the labor market than most of the internal, non-adjusted numbers for January and February. Unfortunately, in March the headline finally converged with disappointing internals rather than the other way around. In the Establishment Survey, the headline increase of 88k was far below expectations, and even below the lowest estimate. The Household Survey contracted by 206k, continuing the volatility that began in the middle of 2012.

The pattern/trend in the Household Survey is now being confirmed by the Establishment Survey, indicating that upward momentum in the domestic job market has now fully reversed.

ABOOK Apr 2013 Establish v Household

If this is a durable trend, and given the overall economic context beyond jobs and labor I think it is good bet that it is, then it removes even the lackluster improvement seen in the numerical count of jobs. We have to keep in mind, however, that the quantity of jobs has been insufficient to this point to maintain some semblance of sustaining economic growth.

Along those lines, we see again that overall wage growth has continued to be stuck in a recession-like rut.

ABOOK Apr 2013 Avg Weekly Prod Nonsup

Where that trend was once limited to production industries, we now see that wage growth for all employees is now trending markedly lower to levels last seen close to the Great Recession trough.

ABOOK Apr 2013 Avg Weekly Total Emps

The combination of these factors is obvious – lower quantity plus lower quality equals growing income desperation. The lack of income has been the most obvious impediment to more robust and sustainable growth.

ABOOK Apr 2013 Empl Comp Busn Indicators

In comparison to other economic indications, it is clear that the numerical job count has lagged both the up and down cycles since 2007. There is no obvious reason for this to have taken place other than an indication of a paradigm shift. This would begin to explain the apparent disconnect from Okun’s “Law” and offer a partial reason for the ineffectiveness of “stimulus” (policymakers simply assumed, because they believe Okun’s Law to be an actual economic “law”, that measures taken solely to increase job counts were enough to shift forward economic fortune, rather than a more nuanced and complete interaction between labor and income).

Previous decades have shown a more durable relationship, and tighter correlation, between the quantity of jobs and disposable income, even in real terms, forming the basis for Okun. However, since the second half of 2010 that relationship appears to have been severed. The most obvious explanation given the timing and the pattern shown in the chart below is QE and the intentional efforts of monetary policy to force “inflation” into the economic system.

ABOOK Apr 2013 Empl v Real DPI

I don’t think QE and “inflation” (commodity prices in this instance) offer a complete explanation for this disruption of the normally tight relationship between jobs and income. But that isn’t to say monetary influences aren’t having any impact. Rather, I think that QE and the financial dysfunction in general have far larger indirect influences on economic parameters, including the way companies (particularly large corporate businesses) have reacted to financial incentives as a result of the Fed’s interference in various markets.

One final note, as has been noted pretty much everywhere else, labor participation has seen a new structural low in March 2013 as even more workers dropped out of the official labor force count. At 63.3%, we now have a labor force that far more closely resembles the 1970’s than the 1990’s. That just reinforces the notion that the employment report is the wrong point of emphasis for far too many observers. Income is far more important, including the fact that more and more former workers at the margins are both failing to find equivalent employment and being forced off government transfers. This is both a commentary on the failure of policy and a warning that we have not yet seen the worst of this current cycle within the economic structural shift that began in 2007.

Despite all the various and massive means of “stimulus”, the economy in the US (and across most of the developed world) fails to respond as expected. This is what I have called financial gravity – the structural changes that are taking place are irresistible regardless of any measures to counteract them.