Given the longevity of the streak, I once again will be taking "The Under" in the Employment Situation Survey today.
However, some of the recent data "adjustments" seen out of BLS make it hard to take any of the headline data seriously. My admonishments regarding the Fog of Katrina are coming all too true. Therefore, I am hard pressed to say whether or not NFP will be yet another example of creative accounting a/k/a Special Hurricane Accounting.
Lookie here: we know that most of the working population of New Orleans have been displaced after the Katrina. That’s somewhere between 250,000 and 400,000 employees no longer on the job, depending upon how many were successfully relocated. We also know that the September NFP numbers showed only a modest drop of 35,000 workers.
What accounted for the difference? According to the BLS, for the purposes of the last NFP report, "a person is counted as employed if they are on a payroll during the survey week." In other words, you were still officially employed, even if only ’cause
your employer couldn’t physically track you down to lay you off.
This month, consensus is for +125,000 new jobs. Those numbers simply do not compute — unless there has been an offsetting 1/4 million jobs created in NOLA.
How is this possible? Special Hurricane Accounting. Consider:
• Q3 Employment Cost Index: (ECI) Wages and salaries, adjusted for inflation, are a negative -2.3% in the quarter. The 12-month percent changes in ECI, unadjusted, is the slowest growth rate on record.
• Q3 GDP (advance): The big driver’s of GDP? Auto sales (GM and Ford giving
cars away at cost), and a big uptick in spending by Uncle Sam. Neither are thought to be sustainable.
But lets dig into some of the components:
-Final Sales (a "demand" indicator) dropped from 5.6% in Q2 to 4.4% in Q3.
-For the first time ever, Personal savings (savings as a percentage of disposable income) in Q3 dropped to NEGATIVE 1.1%.
Here’s the kicker: The Commerce Department could not separate any special effects from Katrina and Rita, which it said are embedded in the data.
• Q3 Productivity: was much stronger-than-expected 4.1%, compared with 2.1% in Q2.
Sounds great, until you dig below the headlines: "The effects of Hurricanes Katrina and Rita, which struck the Gulf Coast during the third quarter, could not be separately identified in the productivity and costs measures."
Productivity is a function of Hours worked and output. We had slightly less output, but a huge decrease in hours worked, thanks to the job losses in the gulf. That made productivity gains appear large, when in fact it was function of so many less workers clocking in down south.
So you can chuck out the Productivity surprise as a BLS "not measurable."
• Personal Income: Consensus was for 0.3%, but the actual data was for 1.7%; How come? Hurricane insurance payments. They offset the lost "rents and lower proprietor income" and then some.
Do note that Same Store Sales were robust, without much in the way of Hurricane distortions. So its not all negative data.
Bottom line on today’s crapshoot: Noobody knows, the data is confusing at best, and whatever number comes out today is likely to have as little meaning as any ever out of the Commerce Department.
Add to all this that Treasury Secretary Snow is scheduled as a morning guest on CNBC — he tends not to do that when the data stinks the joint up — you have the makings of an upside surprise.
I consider myself a "Reality Based Strategist" (RBS). So I will stick with "The Under" — on principle alone . . .