How Meaningless Will November NFP Be?

The usual suspects will be in the full throes of the employment situation report/data dump — the most important report of the month! — or, as I prefer to call it, Friday.

The clock in the corner of the TV screen will tick down, someone will breathlessly read the headline Unemployment Number and NFP info, @TheStalwart will tweet it, and then . . .  Nothing will happen.

Let’s put this into some context: Under normal circumstances, any given NFP number matters very little. The net change in people leaving and starting jobs in any month is tiny — a few 100,000 people out of 150 million or so in the labor pool. It is not a significant number relative to the overall economy.

What does matter is the overall trend — is the economy gaining jobs consistently month-after-month? Is it losing jobs? Are those losses accelerating? What about wages? Temp help? Hours worked? These factors can all be looked at as part of the longer term trends to determine the overall health of the labor market.

Over the past few years, the trend has been a soft improvement. Unemployment has gradually come down from 10% to 8%; year over year gains in people working has been under 2%. So the employment situation is improving, but rather slowly.

This is even more stark when compared to pre-2001 recoveries, which only serves to emphasize that the post-credit crisis recovery is very different than the ordinary recession recovery.

Which brings us to today’s number. There are both upside and downside risks to the consensus number, something that theoretically is the case each month, but seems especially potentially random for November 2012. The consensus estimates of economists surveyed by Bloomberg are for a Non-farm payrolls rise of 85,000 workers (versus 171,000 in October) and a steady 7.9%  jobless rate.

The downside surprise is the possibility that hurricane Sandy significantly reduced not only jobs, but the BLS’ ability to actually track and assemble all of the data that goers into making each month’s NFP.

The upside surprise is based on a few factors, such as strong withholding tax data, or the potential for a continuation of the decent 170k from October.

My guess? I have no opinion . . .

Employment situation report released at 8:30am



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