NFP: Final thoughts

Some highlights from the details of this NFP report:

The average work week surprsingly fell -0.1 to 33.7 hours — that hardly indicates a tight labor market; Also noteworthy: overtime ticked up, revealing a (let’s call it) "reluctance" to hire.   

The Labor Force Participation Rate was unchanged at 66.1%, despite the civilian labor force growing by 335,000 people. Joanie notes that "the unemployment rate ticked up to 4.8%, as we are not creating enough jobs to absorb new/re-entrants into the labor force" (Otherwise, unemployment would have been flat m/m).

The jobs primarily came from Construction, Mining and service-providing industries: Retail Employment was flat, Food and Drinking scored +23k. Construction added 41k (sub-contractors were 32k of that), Mining added 5k, primarily support activity for oil and gas. Education and Health services added 47k.

Bottom line, a fair report. Not terrible, but not great.


UPDATE March 10, 2006 11:30am

Tony Crescenzi observes that Fed Futures is pricing in:

100% odds that the funds rate will be raised to 4.75% at the March 27-28 FOMC meeting, and a 95% odds that it will be raised to 5.0% at the May 10 meeting. For the June 29 FOMC meeting, the market is priced for a 24% odds of a hike to 5.25%, up from 10% Thursday and 0% a week ago.

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  1. B commented on Mar 10

    Off topic but I learned a new word today: jingoism. Funny how history repeats itself.

    Replace Japan with China and the cycle is clearly repeated. It’s not just the US either. Mittal and Arcelor where 80%+ of the French do not support the merger. High inflation, blue collar malaise, cheap foreign labor, exchange rates, post 18 year equity expansion, transition from low interest rates and inflation rates to commodity driven rates, equity investments transferred to housing boom, high oil, war, blah blah blah.

    Next comes wage inflation and more “jingoism”. The markets are going to love this big pile of dog doo. Hey, look at the bright side. When everyone loses their job because 5 million people are employed by foreign companies in the US and the average pay is nearly double that of American companies, you can always open a web site like this to earn your living.

  2. Emmanuel commented on Mar 10

    The equity markets seem to be more optimistic about the NFP numbers than you are, Mr. Ritholtz.

    The 10 year T-Bill is on the move upwards, now yielding 4.775%. Likely, these big NFP numbers will send mortgage rates upwards as well. The fallout it will produce on the housing market should wipe out housing-related jobs and the wealth effect with regard to consumer spending.

    I guess you were right–the DJIA will probably have a dead cat bounce in coming close to all-time highs, which will in turn precipitate intolerably high interest rates that will eventually bring on your fabled Dow Jones 6800. Let the games begin.

  3. anna commented on Mar 10

    Frankly I am depressed by the numbers. There is so much tweaking. There should be a consistent measure mantained through the years with adjusted and new measures added.

    I feel the government is undermining itself. We don’t need that.

    It’s the American choice, Shorterm gain for long term loss.

  4. hbt commented on Mar 11

    In advance of today’s NFP, I had prepared a plan of action- roughly along the lines of if NFP is X, then do Y, if NFP is W, then do Z, etc…. but I ended up doing nothing. mostly because i did not think it would have any sort of range-trading-resolution.

    Further, I was struck by something I noticed in the Financial Times. As I scanned the front page I noticed how Japan, China, the U.K. w/ Brazil & the ECB were all engaged in activities that promote growth in a capalist society. In general, their actions included an OECD Central Bank acting independently (Japan), the attempt to establish legitimate laws to protect property rights(China), working bi-laterally to foment Free Trade (UK& Brazil ) & some monolith energy/power companies pubilcly threatened with T.Roosevelt style anti-trust punishment (ECB).

    Meanwhile, the dropping of the Dubai co. to run the ports was viewed as one more example of U.S. congressmen pandering to their constituents by engaging in protectionism. Now, I cannot say that I was keen on the Dubai co. running things, but that is not the point; the point is that Bush’s failure to secure the Dubai contract, is being primarily reported in hte US as a stunning defeat for Bush politically.
    SO, going forward will the investment money at the margin (where new prices are made) view the Dubai incident as the begining of a new wave of protectionist, Smoot Hawley-like legislation promises for the fall elections ?… Or, could this be a sort of mini-waterloo for the Bush presidency, where his failure to raise a consensus for his views means a wholesale & bipartisan- distancing AWAY from Bush- so that he can no longer “do any harm” ?…
    maybe this later response is too much wishful thinking on my part… but it sure seems VERY bullish, eh ?

  5. hbt commented on Mar 11

    One addition to my post above:… watch the USD next week: if it ignores the econ data due to be released ( busy week ahead), & continues up… then the stock market will follow

  6. Mike commented on Mar 11

    The employment report was hardly encouraging.
    According to the BLS, 243,000 new jobs were created in February. However, the workweek was 33.7 hours, down 0.1% from January but the earnings per hour rose by 5 cents or 0.3%. What do the numbers really mean?
    There are about 135 million folks in the work place. If they work 0.1% per week less, that’s 135,000 less hours at $16.47 per average hourly wage or $2,223,450. If 243,000 make $16.47 per hour, that’s a bit more than $4 million. When you look at it realistically, the picture is not rosy.

    Carl Jung: “People cannot stand too much reality.”

  7. calmo commented on Mar 11

    Mike may have the wrong reality channel (but I do like Jung) pointing out that the official labor force shared its work load with another official 243,000 souls at a mere cost of $2,223,450/ wk (loss of hours).
    This neighborly sentiment allowed these official newbies to earn something over $4M/hr (the official ave wage x the official new jobs).
    So What do the numbers really mean?
    What Jung says it means, (or do I have to divide that $4M by 33.7 to get a comp?)[Was this intended as an artful QED?]
    I prefer the ants and the aphids model view of the BLS to reinforce the footnoted mention that supervisory personnel are not tallied in these surveys.
    The ants are doing a respectable job of managing the aphids except for manufacturing where they refuse to work for min wages; the real estate sector shows no sign of shrinking despite the well publicized slowing in residential housing (It may be early, it may be contaminated by Katrina effects, it may be that only real estate agents know if they are working, [ It may be that it always looks better if you say ‘yes’, if in doubt].)

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