NFP: Revisions & Estimates

Its that time: Today, we get January Non-Farm Payroll data from the BLS. Consensus is 167,000 new jobs, with unemployment steady at 4.5%.

The bigger news is the annual Labor Department’s benchmark revisions (April 2005 through March 2006). Its a total wild card: BLS estimated the revision could be as high as 810,000 jobs for the year. Estimates (not revisions) for the April-December 06 are also due.

If the revisions come in as expected, that means the BLS has been undercounting jobs by ~40%. That is an astounding miss. (How much of a role Katrina played wreaking havoc with Gulf Coast data collection is also an unknown) If that’s the case, perhaps its time for BLS to do a full blown review of their methodology. Having more accurate and timely data production would be a huge assist for Corporate Strategic Planners, Wall Street, and government planners — including the Federal Reserve itself. Yes, its arcane data management, but someone in Congress should be pressing for this to be corrected so reports are accurate on a timely basis.

Unless the revisions are way soft, the expectations for the Fed cutting in 2007 are all but toast. And ironically, its as even more soft economic data has surfaced. ISM, like Chicago PMI, has dropped to recessionary "manufacturing contraction" levels. US car sales in January were punk, with GM sales dropping 17% and Ford sales off 19%; For the month, total US vehicle sales (all makes and models) fell  4.6% y/y. The big 3’s market share of US auto sales is at a record low 50.6%.


We know the GDP data was skewed, and is likely to be revised downwards. (Recent history has been NFP revised upwards and GDP revised downwards). That’s before we consider how much economic activity was borrowed from future months courtesy of the balmy January weather.

The bifurcated economy continues apace: While I expect continued weak auto and housing sales, strong sentiment data implies strong (or at least decent) job growth.

But as to the BLS release? Initial NFP data is anyone’s guess  . . .

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  1. Gary commented on Feb 2

    A little off topic but has anyone noticed that China was off another 4% last night. There’s a lot of money being sunk in China. If the Chinese market collapses like the middle east markets did you have to wonder if there will be a ripple effect. It’s always something coming out of left field that throws a monkey wrench into the works. I’ll be watching this one closely.

  2. VoiceFromTheWilderness commented on Feb 2

    It is now well established that this administration has been manipulating data, controlling research, and altering conclusions on such relatively minor work as climate change at NASA. We have also recently been informed that the administration is putting political operatives in charge of *all* administrative organizations under its control. Is there any reason to believe that they wouldn’t be spinning economic data which has got to be the single most important component of public perception of the performance of an administration?

    There is no longer any reason to believe any data coming from this administration at any level.

  3. Leisa commented on Feb 2

    I see that Cramer is calling for a fed cut in May as a sure thing. I heard that siren song much of last year. Though I tend to believe what some of the pundits say, and that is that the Fed will not sacrifice the homeowners. We’ll see how the foreclosure rates fare–

  4. Barry Ritholtz commented on Feb 2

    That’s premised on the economy is slowing dramatically . . .

    Hardly a “booyah bet.”

  5. M.Z. Forrest commented on Feb 2

    I remember getting grief a few weeks ago over a dollar rally against the Euro. The rally was remarkably short lived.

    I still think stagflation is the highest probability event. Magic Eight Ball says unemployment will go past 5% this year. Look for some real pain inflicting the Midwest in particular as GM and Ford continue their closings and restructurings.

    YE prediction: Dow 15,500.

  6. Thomas B commented on Feb 2

    I agree with “voice”– DON’T believe the Govt’s voodoo numbers. I can tell you MY industry looks horrible: PFE axing 10 K jobs after dropping a similar number just 3 years ago when they closed on PHA; BMS on the block; Bayer closing Connecticutt; Astras-Zeneca announcing cuts; Lilly closing Icos.

    I would LOVE to see evidence of an improving job market with my own little brown eyes…..

  7. Gary commented on Feb 2

    Here is my take. We are in a similar global situation as in the 70’s. War, rising commodity prices from lack of infrastructure build out and we’re coming down from a serious stock market and real estate bubble. On top of that we’ve got a serious problem developing with Social security, medicare and the baby boomers retiring. The only course of action is the same one taken in the 70’s, print money. However the outcome of that road wasn’t to rosey last time so they need to do something different. Somehow they need to keep the money from flowing into commodities. As long as it flows into financial assets everybody’s happy and it’s not considered inflation. The other part of the equation is manipulating the data so it appears that everything is humming along nicely. If that takes substitutions and hedonics to rig the PPI & CPI so that inflation remains tame so be it. Or how about magically finding an extra million jobs last year. You can fool all of the people some of the time but not all of the time. I suspect there will come a time when nobody believes anything coming out of Washington anymore. Sooner or later one or two of the sheep won’t jump over the fence any more. Then maybe a few more and so on. I’m sure the government and the Fed will try every trick in the book to keep the bear at bay but in the end the forces of supply and demand will more than likely win out. Take a look at housing. We just plain built to many houses. The speculators are gone since it’s obvious that 20-50% appreciation isn’t actually guaranteed. The Fed is fighting the real estate deflation but it’s still happening whether they like it or not. They may slow it down but until supply and demnad get back in line I doubt it’s going to reverse course more than momentarily. My guess is the same thing is going to happen with commodities. Until supply and demand get back in line prices are going to increase. The fed’s money printing is only going to exacerbate inflation.

  8. Thomas B commented on Feb 2

    “Take a look at housing. We just plain built to many houses.”

    My take on housing is that jobs are scarce (whatever Bush says) and housing prices are high– this is an unsustainable bubble. Luckily, I live in a state where I don’t think the housing market is inflated.

    How do we feel about stock for ’07. I’m leaning towards slightly bullish. I think speculators will want a different place to put their money……

  9. James commented on Feb 5

    We are in the tail end of another asset mania. Where are reits going to go? Are they eventually going to yield 1 percent. There is nothing on earth that is undervalued. Everyone can keep chasing crap higher, but risk is off the hook.

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