DOH! I thought I posted this before I headed out earlier today — here is a belated update
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Heckuva a number, Ben.
As feared, the strong number generated selling in both the Bond market (sending yields higher) as well as equities. The initial dumpage of stock futures is showing equities attempting to claw their way back off the lows.
As to the employment data, a few interesting items:
• The big gainers were Professional and business services (50,000); Health care (31,000), plus more ambulatory
health care services (14,000), and hospitals (11,000); Services for buildings and dwellings
gained 13,000;
• Employment
in construction was about unchanged over the month;
• Manufacturing jobs continued to trend downward;
• After increasing by 295,000 in 2005,
construction employment was little changed in 2006.
• Temporary help services employment was
little changed over the month and over the year. Temp #s are forward looking, and often precede actual permanent hiring.
I still don’t know which data to believe, ADP or the soon to be revised BLS. But its apparent that the market is looking at this — plus today’s Fed speechifying — as reducing the odds of a rate cut anytime soon…
I still don’t know which data to believe, ADP or the soon to be revised BLS.
Calculated Risk has a brief discussion of this then links over to Econobrowser where Dr. hamilton goes into it a little deeper.
Regardless – I think your analysis is correct, no rate cuts anytime soon, nor do I think there should be any.
Don’t they need to take the Buy Program thingy out of the closet right about now (3pm)?
This is off the topic but i saw an amazing piece on CNBC. They kept teasing that they had evidence that housing had bottomed in California. The piece was that home builders are going to build as many homes this year as last year. CNBC thinks that shows stabilization not that the builders are continuing to overbuild. This comes after LEN this week called California a disaster and sold off a lot of land there.
Does anyone remember when CNBC was a serious business channel? I understand that CNBC stands for Cramer and Nothing But Cramer.
CNBC is a an utter joke. I put my TV on mute when I watch.
I never use the BLS numbers. ADP has had supbar(pre-recessionary) numbers for 3/4 months(last month outright). Way to many jobs and “income” growth stated that don’t exist IMO. The big revision downwards is coming(whether it is one month or 2 years so be it).
Considering the staffing of the BLS, they are just incompetent. That represent the sad sad state of affairs of American government right now, but they are what they are.
Mike M,
The problem is even with the sound off you can still hear Cramer.
I still don’t know which data to believe, ADP or the soon to be revised BLS.
I’m quite bearish on the economy going forward, but I don’t see any reason why the December payrolls should have been exceptionally weak:
Housing completions have only fallen slightly so far (they lag starts 6-12 months) and commercial construction downturns tends to lag residential. So no major job losses there.
Energy price declines in Q3 and Q4 gave consumers and businesses more breathing room, and December, arguably, showed the first real signs of trouble in the retail sector.
Plus companies don’t like to lay people off in just before the holidays.
So the BLS job report makes more sense to me.
I would expect payrolls to get more dicey in the next few months though.
I’m quite bearish on the economy going forward, but I don’t see any reason why the December payrolls should have been exceptionally weak
I second that opinion – especially considering the ‘global liquidity’… I would have been surprised if the ADP guess was confirmed.
I will fourth it. After the fall rally in the markets, I suspected the timing of a recession in the first half of 2007 was probably off, and it was. Looks like growth “really” began decelerating in Q4 rather than Q3.
I would argue the 1973 downturn should be explored and the market bust that followed the January highs. Especially with signs of productivity slowing.
Sort of like H2 2000 and H1 2001 all in one year lol(2007).
Though if ADP is right, and the government does a big downward revision(to many “quasi” employed types like “self-employed” being counted eh?) to the ADP numbers, ADP might get some respect in moving markets and that is the highest form of you have arrived.
I never use the BLS numbers. ADP has had supbar(pre-recessionary) numbers for 3/4 months(last month outright). Way to many jobs and “income” growth stated that don’t exist IMO. The big revision downwards is coming(whether it is one month or 2 years so be it).
Considering the staffing of the BLS, they are just incompetent. That represent the sad sad state of affairs of American government right now, but they are what they are.
No that’s not right. The fine denizens of the Calculated Risk discussions who show up here are going to think I’m schizophrenic (in the medically inaccurate sense).
Alas the perils of the Internets.
LEN this week called California a disaster and sold off a lot of land there.
It is worth noting that the “land” Lennar “sold off” is actually an interest in a partnership which owns several thousand acres in the Santa Clarita Valley, about 40 miles north of Los Angeles.
http://www.latimes.com/business/la-fi-lennar3jan03,1,5303778.story
Here’s the article from the LA Times, with some definite positive spin thrown in:
Lennar to shed stake in housing venture
The builder sells control of Newhall Ranch amid a slump. The deal hints at an improving market.
Lennar Corp. said Tuesday that it would sell a majority stake in a joint venture that owns one of the largest residential developments in Los Angeles County, the latest example of a home builder selling land to cope with a bruising housing slowdown.
But the fact that buyers are snapping up such land is a sign of improving confidence in Southern California’s home-building market, analysts said.
Miami-based Lennar, the nation’s third-largest home builder ranked by unit sales, had no trouble finding a new partner in its venture, which involves the proposed 20,000-home, 15,000-acre Newhall Ranch community in Santa Clarita Valley.
“We are excited to be investing in such prime property in Los Angeles, a market that we have favored for its long-term growth prospects,” said Victor B. MacFarlane, founder and managing principal of MacFarlane Partners.
The San Francisco-based real estate investment firm is buying a 62% stake in the venture for $1.3 billion, with backing from the California Public Employees’ Retirement System, the nation’s biggest public pension fund.
By selling a large chunk of the project, Lennar and its current partner, LNR Property Corp., will each get $660 million in cash, and Lennar will be able to report a profit of $500 million on its investment while lessening future risk.
The deal, expected to close next month, brings in a new partner with “strong financial resources and expertise,” according to a joint statement by Lennar Chief Executive Stuart Miller and LNR CEO Jeffrey Krasnoff.
Meanwhile, Lennar will retain a 19% interest and collect management fees from the venture and will continue to have rights of first option to purchase land owned by the partnership.
The transaction underscores the increasingly prevalent view among industry insiders that the current decline in the Southland’s housing market could be short-lived.
“It’s good that there’s activity like this because it provides some hope that the market is getting better,” said G.U. Krueger, an economist with IHP Capital Partners, an Irvine real estate investment firm that also works with CalPERS.
Other signs have emerged in recent weeks that the region’s housing market isn’t deteriorating as quickly as it had been. Fewer homes are on the market today than during the early fall. Builders have been winnowing down their supply of unsold homes while holding off on constructing new ones.
What’s more, the economy continues to create jobs and interest rates have stabilized, which many expect will help stimulate demand in the months ahead.
These factors are spurring a growing number of developers and others to look for land in Southern California. But many investors are having a hard time finding the right parcels to acquire, experts say.
“There’s a lot of snooping around, but they want to make sure they are not overpaying,” Krueger said.
Landowners, particularly major builders, have been reluctant to lower land prices even as they cut prices on their homes. That is helping builders unload unsold homes but is also pushing down home prices regionwide, giving pause to potential land buyers.
Landowners “are not getting offers from us they want to see,” said a land acquisition specialist with a mid-size builder who declined to be named because he’s involved in land negotiations. His company, which builds homes throughout Southern California, is “in an active buying mode” but is reluctant to purchase property that doesn’t pencil out at current housing prices.
Yet, the lack of low-priced property also suggests that landowners haven’t gotten desperate enough to sell at a discount, another sign that the Southern California market is holding up better than other markets.
“The big land holders haven’t gotten to that point yet, when someone else can step in and get a good deal,” said Michel Faris, who specializes in the Santa Clarita and Antelope valleys at land broker Park Place Partners.
Lennar looks to be getting a good deal by selling the stake in its Newhall Ranch project, which it acquired when it purchased Newhall Land & Farming Co. in early 2004 for $990 million. The home builder now co-owns the project with LNR Property, a Lennar spinoff.
Newhall Ranch, which spans west of Magic Mountain to the Ventura County line, is envisioned as one of the last master-planned communities in Los Angeles County.
It not only will include thousands of homes but also schools, roads, commercial development and other infrastructure that will take the next two decades to build out.
Plans for the first 1,400-home phase of the proposed community are slated to go before the county Regional Planning Commission this month.
In the last few months, a number of big home builders have forecast lowered earnings and have pruned their land holdings or taken losses on land deposits to help balance their books.
Los Angeles-based KB Home, for instance, sold its majority stake in a 5,000-home development in Palmdale last fall.
Lennar also said Tuesday that it expected to post its first quarterly loss in a decade when it reports earnings this month, largely because of land-related write-downs.
Lennar derived nearly a quarter of its business from California in 2006.
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For what it is worth, inventories of unsold homes in Valencia, not far from where this “Newhall Ranch” project is slated to go in, are still high, prices are still stagnant, and a good friend who is a realtor near where I live (not Santa Clarita) says the market is “dead.” Meanwhile, she is selling off her own properties, one or two a year, and partying like it’s 1999 on the proceeds (net of a boatload of taxes).
I will add to my prior post that whenever CalPERS invests in an asset class, it’s usually a sign of a top.
I think there is a French expressions that translates to: The Seller knows more than the Buyer…
and Lennar may need the cash.
Calpers pulled out of selected emerging markets about 4-5 years ago citing governance problems. Many were in Asia and they missed the party on that one. So they are wrong on the in and the out direction. Perfect contrary indicator.
Winter?
As there was no winter in the Northeast, I guess that a lot of jobs are created, that otherwise would have been lost.
That also means an acceleration of construction, if trends persist, the hammer will come as soon as about march 2007!
Keep in mind that according to the following table, the 167,000 includes 55,000 IMAGINARY jobs:
http://stats.bls.gov/web/cesbd.htm
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This late week swoon reeked of another HF blowup…obviously overweighted the “stuff stocks” — cooper, and oils. The key clue was the outperformance in the Nasdaq. All the “correction is coming” lemmings folded their hands.
Emerging markets took a hit on a strenghtening yen and a reserve requirement hike in China. I expect them to be down overnight, and our futures market to bottom by 10:15 monday am, at which time I will be aggressively buying growth stocks. Hit my bids!
The VXO hit its 200 day ma, and the put call is very high (again)…we’re in the 2nd inning of the swap from “value” (energy) to growth, which has been the red headed stepchild for 6 years.