Boy, I picked a hell of a couple of days to be unplugged. I leave my desk, and the market screams higher. Well, I’m back in the saddle, and just in time for everyone’s favorite BLS report, Non Farm Payrolls.
As usual, I will be taking "the Under."
Bloomberg consensus is for about ~123,000 new jobs. The range of predictions for the increase in payrolls runs from 50,000 to 200,000 new jobs. The average payroll gain this year, according to Bloomberg, has been 141,000/month. That’s down from just over 200k/mo last year.
There are several factors that imply a weak jobs number. The only question about consensus is how much of these are worked into the various guesstimates.
• The ADP preview shows ‘sluggish’ gains of 78,000 jobs; (I have yet to be convinced that the ADP report is either consistent or precise, so take this data point with a grain of salt).
• It is now taking more time for displaced workers to land jobs; 4.2 months in the third quarter of 2006, up from 3.6 months the prior quarter;
• There has been a surge of layoffs in September — up 54% vs. August;
None of these suggest robust hiring in September.
The biggest job related "conundrum" has been the lack of hiring in Retail. Given the decrease in gasoline prices, and the corresponding uptick in consumer spending (see: Falling Gas Prices Help Low End Consumer), one might think retail would be adding bodies.
In addition to weak surprisingly weak retail job numbers, the WSJ points to weak temp hiring, as well as weak retail hiring, as a current employment trend that is less than encouraging. In the past, these two groups have been significant early indicators:
Lou Crandall, economist at Wrightson ICAP, a bond-research firm, calls them a gauge of corporate energy levels. "When they’ve got a lot of new projects that ultimately lead to expanded economic activity, [companies] suck up temps," he says. Troublingly, year-over-year growth in temp employment has slowed from more than 6% last year to 2.5% in August, a possible sign of brewing corporate retrenchment.
Retail employment might send similar signals. The last two times it dropped — in the early 1990s and the early 2000s — it was accompanied by a recession. In August, it was down 0.7% from a year earlier."
With Retail sales and profits still strong, it remains puzzling as to why this sector is not expanding more rapidly. Some in the industry are blaming the "lack of qualified workers" for the weak retail housing, but I don’t but it. Entry level retail sales is a low skill job; Even handling the register requires only the most basic of skills.
I am sticking with the under . . .
October 6, 2006; Page C1