Payrolls and the Fed

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Fed struggling to meet its dual mandate of full employment and price stability.

Still losing on both fronts.

Congress and the Admin can’t be feeling good about any of this.

Their belief in ‘monetary policy’ has to be fading after a prolonged period of the 0 rate policy and trillions of quantitative easing.

Quick take.
The payroll number, down 85,000, was moderately disappointing. There was no meaningful net revision. Given the likely data distortions it should have surprised to the upside, as I suggested to you yesterday.
The big story is the household survey measure of employment. It crashed. According to this survey employment fell by 589,000 in the month of December.
Some revisions to this series cut last month’s positive number almost in half to +139,000.
The three-month average is now -325,000. The four month is a little worse. The five month average is also a little worse. But only a little worse. Smoothed household survey employment continues to decline at a rapid rate.

This series is a very noisy series. Nonetheless, one cannot ignore the fact that all smoothed measures of this series show sustained employment losses.
If I am right that seasonal adjustment and birth/death model distortions to the payroll statistic might have added as much as 200,000 to payrolls, the underlying payroll decline might be on the order of 250,000 – not very far out of line with the smoothed household survey.

The workweek was unchanged, preserving its big gain of last month. There are no other major surprises.
I have argued that recent strong reports on final demand have been distorted to the upside by several statistical problems and that the trend in final demand has been weaker than the data shows. I have argued that the withholding tax data suggests that consumer income has still been in decline.
This household survey employment data supports these two theses. In fact, it suggests the recession may never have ended. Things in the US could well start deteriorating faster than I had hitherto felt.


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