NFP Day — Abandoning the Over?

In April, I deviated from the longstanding "Under" gamble and took the "Over." It was a winning bet.

Last month revealed that April’s release (for March jobs  data) was a mere exception to the rule. All the Katrina relocatees were finally caught up with by BLS. Like GDP, they reflected a surge which was really a push forward from Q4 2005. 

The overall trend remains soft. While I have no particular feel for this month, the Bloomberg consensus for 170,000 (Reuters survey is for 175,000) shows that perhaps the Dismal Scientists have finally figured out that job creation is not what it is typically at this phase of a recovery. (Look for a big NYT story on this subject Sunday).

I’m tempted to take neither the Over or the Under — perhaps they (collectively) got it right this month. (And by right, I mean plus or minus 10k).   


Update June 2, 2006 7:41am

WSJ’s Justin Lahart suggests we "Worry less about the total number than the wage component:"

"But with the Federal Reserve on inflation watch, the number that matters most could be elsewhere in the report.

The government’s measure of average hourly earnings — a proxy for wages — has been marching higher. If the march continues, market players will worry the Fed has more wood to chop…

Wages might have accelerated more than economists estimate. Private staffing firms surveyed by Bear Stearns analyst Andrew Steinerman said a tight labor market is allowing them to raise fees. If these businesses are able to charge higher prices for their services, maybe workers were able to charge more for theirs."

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  1. Mark commented on Jun 2

    Wow! That was EXTREMELY WEAK!

  2. Jim commented on Jun 2

    Did anyone catch the website the kid who won CNBC’s Maserati said he used for inspiration?

  3. DV commented on Jun 2

    Does the 0.1% wage component have any correlation w/ CPI , PPI or deflator ? looks like we’re slowing fastttttttt

  4. chris commented on Jun 2

    jobs number comes in at the low end, the economy is slowing but oil still at 70 …. what is going on. I would not be surprised to see the dow close down today. now the fear is inflation and a slowing economy.

    CNBC is pumping the pause. … i dont get it.

  5. B commented on Jun 2

    We already had a glimpse with ADP number. It was fugly. Still in the need to raise rate camp?

    This is likely to be a frigging mess with the housing scenario unfolding. Who’s gonna buy these inventories that are exploding? All of those people NOT getting a job? Asset deflation……..on how grand of a scale? The economy is flexible…….till it is no longer flexible. The recession in 01 was an oddity because it was induced by business ONLY as the consumer kept spending. The business world has still not recovered and is still cleansing. That is why capex never recovered. It’s a damn good thing they have all of that cash cause they’ll likely need it. Now, will the consumer follow the same path of cleansing this cycle? Time for the consumer to build cash after a massive blow off similar to 2000 for business? Now, the Fed needs to quit worrying about rates and start worrying about something no one ever thought possible. The paradox of thrift. They need to make sure a cycle of spiraling and self fulfilling consumer actions doesn’t arise that could compound deflationary problems. Will the masses ultimately bring about their own demise by attempting to save?

    In many regards this is the cycle end similar to 1929 for the consumer. They are now entering a recession. How severe? Who knows. Those who believe in cycles will recognize the last major consumer driven recession was just about seventeeenish years ago. And seventeenish years before that was…….yep…….1974. Just as the American worker panics about globalization, what effect will this have should a serious slow down emerge? Emerging markets, which are significantly less resilient, less robust central banking policies, less innovation, less flexibility, less sophisticated and very reliant on America would suffer disproportionately. So much so that they are of little or no threat next cycle as they now suffer their own 2000 or 1929 with these massive blow off economies? Time for the America is dead doomer and gloomers to bring their money home?

    People goading on Bernanke not to be beholden to markets and prove his mettle are playing Russian Roulette with their own livelihood cause as the dominos fall they are likely to feel job losses or wealth destruction. We’ll likely see 8-10% unemployment before this cleansing is complete.

    Worst case scenario that all depends on housing. The one safety net Americans have always believed would go up in value. If they lose that one belief…….

    Let’s hope they are relatively correct. I think Goldilocks has met the three bears.

  6. tjofpa commented on Jun 2

    As i watched the market continue to strengthen into the close yesterday, warm and fuzzy feelings came over me that somehow the jobs # was going to be market friendly…
    Expect the selling to start in earnest at precisely 10:14 am

  7. a commented on Jun 2

    NFP bomb ……it is getting tricky day by day for BB and FED’s band…hoooahh we gonna witness very interesting times

  8. me2200 commented on Jun 2

    I agree this is getting messy. I thought the Dow futures were out to lunch this morning and I was right. Futures were +40 right before open and yet the market opened at -50.

    The media has it wrong. They are blaming the Iran situation and worry about the Fed rate hike for the slow trading today. That isn’t it ! The Fed hike is really over rated. 25 basis points is neither here nor there in the grand scheme of things and if it is, we should be rallying because bond yields have fallen quite a bit in the last 2 weeks. But we aren’t.

    The real issue here is that traders are starting to see a collapsing housing market and a slowing economy. That is the story. There isn’t enough data to say it is fully happening yet, but people see the current situation and they are forecasting the worst, which is a slowdown.

  9. GRL commented on Jun 2

    Nonfarm payrolls rose only 75,000 but unemployment is “down” to 4.6%. Sounds like a lot of non-participation in the labor force, as discussed here previously.

    Yet, inflation continues apace.

    John Mauldin wrote a few months ago about something called the “sacrifice ratio,” i.e., the amount of uneployment the fed must create to achieve a given reduction in inflation.

    It would be interesting to hear what BR thinks about the sacrifice ratio, what it is, and where it stands today. (Hint: The fed speeches I saw say it is higher than in the 90’s and rising.)

    Just do a search on “sacrifice ratio” in the FRB website and some speeches by Kohn and others should pop up.

  10. Mark commented on Jun 2

    I also agree on the “messiness” and wish Ben Bernanke all the luck in the world with this. I think the reversion to the mean on household savings is going to come into play. That may not be what the doctor ordered as the trend acceleration (deflationary) B mentioned leads to very ugly outcomes.

  11. me2200 commented on Jun 2

    Everyone crows about the Fed over tightening. But, you know, the market is fickle. People will spend, spend, spend until they can get no more debt and then you’ve got a problem. How is the Fed supposed to slow things down without killing the economy outright.

    Frankly, I think the economy is now on its way to a recession, but I don’t blame that on the Fed. Housing was going to commit suicide whether the Fed did anything or not. The Fed just gave them a gun.

    Re: savings rate reverting to the mean ? You must be kidding. If we have to achieve that, this is going to be tremendously painful. Consumers don’t even know the meaning of the word savings.

  12. S commented on Jun 2

    Coming soon to a theater near you: The suave, debonair, swashbuckling Ben Bernanke in the lead role of the highly acclaimed film Mission Impossible IV.

  13. vf commented on Jun 2

    Bernanke will get blamed for the puke but it is Greenspan’s fault

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