Payroll disappoints (again)

Source: BLS

The U.S. economy added fewer jobs in January than forecast.

January payroll employment rose by 112k, 36% below the consensus of 175k. Whisper numbers, those now illegal sweet nothings between CFOs and their favorite analysts, were as high 300k. (Note that Reg FD made whisper numbers illegal; there certainly never should ever be whisper numbers with government data releases).

My friend Brian Reynolds is the Chief Market Strategist at MS Howells. Brian observes:

“Of the 112k rise in payroll in January, retail trade accounted for 75k. This segment was weak in December as stores did not hire as aggressively for the holidays, thus the lack of post-holiday layoffs make it appear that January hiring was strong. So, based on that, this number is weaker than on the surface.”

Additionally, Brain notes that the BLS does does their annual benchmark revision this month, and the revisions which were widely believed to be a change for the better, instead seem to be getting revised downwards. Eeewecch.

Bloomberg news noted that “Some companies are beginning to add workers after the economy expanded in the second half of 2003 at the fastest pace in two decades. More hiring may be needed to help boost spending and lift the economy by raising incomes. Slack job growth keeps wage increases tame and gives Federal Reserve policy makers room to hold their target interest rate steady.”

The good news, at least for the equity markets, is that the Fed is under no pressure to raise rates any time soon with such sub-par job growth.

Our speculative forecast was off by half. Our thesis was that the Fed was looking to prevent one of two types of inflation. One possibility was that they got an early look at the numbers, and that prompted them to change their language.

That was obviously incorrect. The other possibility — the Fed was trying to let some air out of a growing equity bubble — is still in play.

UPDATE: 02/06/04 10:42am
Jeff Cooper fell into a similar gambit I did with the Fed. Jeff wrote prior to the Jobs numbers release:

“President Bush appears on “Meet The Press” on Sunday . . . This also may have caused traders to square up positions and cover shorts in front of the employment data even more so. The thinking being that the president would not want to go on such an important venue in an election year unless the administration knew that the jobs data were good. Hmmm, just asking.”

Great minds may think alike, but us idiots all make the same mistakes — together!

Employment Situation
January 2004
Bureau of Labor Statistics

U.S. January Payrolls Up 112,000; Unemployment Falls
Carlos Torres
Feb. 6 2004 (Bloomberg)

U.S. Payrolls Grow by 112,000, As Unemployment Rate Drops
WSJ, 9:28 a.m. EST Friday, February 6, 2004,,SB107607405521222963,00.html

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  1. Mark T commented on Feb 6

    not letting the air out of a growing speculative bubble in equities perhaps – rather out of one in bonds. Remember, it’s the 10th anniversary of the bursting of the 1993 bond bubble – which grew last time he left rates too low for too long. The economy doesn’t need 1% rates, nor does the market. In fact the market is better off with rates at neutral. Problem is, how to get there?

  2. Jim Picerno commented on Feb 6

    A whisper’s as good as nod to a blindman.

  3. Holden Lewis commented on Feb 7

    Ditto about idiots

    I, too, got suckered by thinking that the Fed had got an earlier peek at the employment numbers (why else would they say, “Although new hiring remains subdued, other indicators suggest an improvement in the labor market.”?), and I outfoxed myself with the drop in productivity. In my mortgage blog, I was screaming from the rooftops, “Lock by Thursday! The end of low rates is nigh!”

    Gawd I feel like a moron. At least I have the excuse that I was a journalism major and not an economics major.

    (Read my blog, Mortgage Matters, at )

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