Tag Archives: Payrolls

3 most important numbers

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From Karim:

  1. Index of aggregate hours -0.3%
  1. Diffusion index from 50.0 to 46.2
  1. Median duration of unemployment from 8.4 to 8.8 weeks

So output likely declining, more industries shedding jobs than adding, and l-t unemployed accounting for larger % of total unemployed

Other notes..

  • Unemployment rate falls from 4.97% to 4.925%.

Partially reversing last month’s rise.

  • Temp jobs fall by 9k (good coincident indicator)
  • Average hourly earnings up only 0.2%
  • Net revisions to 2007 -376k
  • NFP decline of 17k first decline since 8/03

This is not the first reported drop in payrolls, as August originally reported down 4,000. It was eventually revised up to 92,000 and then further revised up to 74,000 with benchmark revisions.

December was revised up to 82,000 from 18,000.

November down from 115,000 to 60,000.

This rearranges the sequence with November now possible the bottom, should January get revised up higher than 82,000.

  • Rare decline posted in business services (-11k)
  • Mfg (-28k) surprising in light of weak $
  • Construction sheds another 27k
  • Govt loses a surprising 18k jobs

Yes, these look like the kind of numbers likely to result in the kinds of revisions we’ve been seeing continuously for at least six months.

And the revisions to payroll numbers have put them more in line with the ADP numbers.

ADP was up 130,000 for January.

December durable goods was a blowout number.

Inventories were down substantially in Q4.

While the initial reported payroll numbers have all been substantially revised, markets have continued to respond to the initial reports and not to the revisions.

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Payrolls

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On Jan 4, 2008 10:43 AM, Mike wrote:

> Warren, right now economic sectors in stock mkt are pricing in a severe
> recession-your call on no recession is extremely out of consensus now-I
> think that mkt has overdone the recession theme short term…

Agreed!

We may get to 0 or negative growth for a quarter or so, but probably not due to financial sector losses, ‘market functioning’ issues, or housing related issues.

More likely if it happens it will be a fall off in exports or something like that.

Also, the Fed can’t talk about it, but it knows it’s way behind the inflation curve due to fears of ‘market functioning.’ Their concern now turns to the ‘insurance premium’ they paid- food, fuel, $/import prices.

ISM service just came out- solid number.

Orders and employment strong, prices strong.

And in today’s employment number service sector jobs expanded faster than the rest fell, so q4 remains ok at 2% or so, and q1 still looks up.

I still see GDP muddling through (assuming exports hold up), and upward price pressures continuing indefinately as Saudis/Russians keep hiking.

Saudi production numbers due out for Dec any day. That’s the best indicator we have for whether demand is holding up at current prices.

warren
> Mike

Yes, a weak number for sure, though probably as expected by those originally looking for negative growth for the entire quarter.

And only a few months ago a negative employment number was revised to a strong up number.

And unemployment is also a lagging indicator, reflecting the weakness of several months ago.

Service sector added 93,000, other sectors lost, so employment continues its multi year shift.

And, however weak demand may have been, from the Fed’s point of view it was still strong enough to further drive up food/fuel/import prices.

3 mo libor down again and now about 75 bps lower than August in absolute terms, and spread to ff falling and way down from the wides, cp starting to expand, and most everything indicating market functioning returning and financial conditions easing..

The Fed views this as an ‘ease’ the same way it viewed the reverse as a ‘tightening’ when it cut 50.

Even write down announcements have subsided with less than 100 billion in write offs announced so far. In 1998, for example, $100 billion was lost the first day due to the Russian default, with no prospect of recoveries. That’s probably equiv to a 300b initial loss today.

Also heard this statement on CNBC: current oil prices mean $4 gasoline at the pump, and that will cut into consumer spending so the Fed has to cut rates to keep us out of recession.

That’s exactly what the Fed doesn’t want to happen- they call that monetizing a negative supply shock and turning a relative value story into an inflation story.

With the return of ‘market functioning’ the risks to growth change dramatically for the Fed.

They are now far less concerned about ‘the financial system shutting down’ and instead can now get back to their more familiar discussion of the long term relation between inflation and growth when making their decisions.

A fiscal package is being discussed to day by Bernanke, Paulson, and Bush. That would also reduce the odds of a Fed cut.

With their belief that fiscal is for the economy and monetary policy for inflation, the mainstream might prefer to see a fiscal response to support gdp rather than an inflation inducing rate cut to support growth.

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