NFP Update


Nonfarm payrolls increased 111,000 last month. December was revised upwards to a very respectable 206,000 (from167,000), while November was upwardly revised to 196,000 (from 154,000).  Both of these numbers reflect greater than population growth job creation. Unemployment edged up to 4.6% from 4.5%. The workweek fell slightly 33.9 to to 33.8 hours; Total hours worked slipped (0.1%). The Manufacturing sector’s long slide continued, falling 12 minutes to 40.8 hours; Factory overtime also declined.

There were a few other standout issues in the NFP worth exploring more: First up, the general economic slowing, despite the reported 3.5% GDP. Rex Nutting observed:

"The two most important indicators for January have now
flashed a warning sign in the direction of the Federal Reserve. With
the Institute for Supply Management index falling below 50% and the job
market weakening, the latest data show the economy downshifting as 2007
began. (But it’s only one month)."

This is noteworthy, because ISM leads GDP (I’ll put up a chart later today posted here).

The 2nd issue is the still elevated Real Estate related jobs. Peter Boockvar of Miller Tabak makes the interesting observation that:

"One area of the payroll data today that I want to point to is in Real Estate. I pick this industry b/c it has been such a big driver of growth since the end of the last recession, particularly in residential RE which of course is experiencing a downturn in construction, sales and subprime mortgages.The decline in residential RE and its subsequent impact on consumer spending is the basis of my bearishness as many of you know.

The RE subindex within the RE and Rental and Leasing section in today’s data reveals a RECORD # of people employed. This area doesn’t include finance jobs such as lenders and mortgage brokers. It includes lessors of residential and commercial RE, RE agents and brokers, RE property mgr’s and appraisers. My point is that outside of construction and subprime co’s, the industry is still betting on a bottom in residential RE and continued strength in commercial.

All told, this reflects a slowing economy. The Real Estate sector is staffed for a turnaround. I suspect they may be premature.


Bureau of Labor Statistics
of the U.S. Department of Labor, February 2, 2007

Analysis: Labor market weak, despite revisions
Rex Nutting
MarketWatch, 9:01 AM ET Feb 2, 2007

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  1. bostonian commented on Feb 2

    Your RSS feeds are full of HTML this morning. New problem, since yesterday — are you using a new tool or different settings? Great blog, by the way.

  2. Michael C. commented on Feb 2

    BR said The Real Estate sector is staffed for a turnaround. I suspect they may be premature.

    And TOL, another McMansion builder, is hitting up against its year high. Guess the shareholders thought that TOL weathered that storm with no problem…

    The liquidity and “do no wrong” mentality out there is absolutely incredible…

  3. Craig commented on Feb 2

    Copper is down 8% this *WEEK*.
    Not a good sign for construction.

  4. Barry Ritholtz commented on Feb 2

    Yeah, I switched to full RSS feeds. (I may end up inserting ads, however)

  5. NotLereah commented on Feb 2

    “Staffed for a turnaround”? They never really “unstaffed” from the boom.

  6. Robert commented on Feb 4


    We are in Omaha. Sales hit the wall here last summer and construction has really slowed down. Omaha builders run on tight margins, so no national companies are in the market. A lot of immigrant construction workers: far more than I recall seeing in Colorado Springs a few years ago. The saying than was that Mexican subs could to concrete flatwork, but not vertical (basement walls). Here, today, they do it all.

    I kind of think of this as flex staffing. When residential slows down, they can go back to lower cost Mexico and ride it out until the jobs come back.

    We were planning to build a McMansion last spring and fortunately chickened out and purchased a much more modest home. (I can walk to work). One thing that struck me when I was gathering bids was that some potential subs were hostile to providing proof of workman’s comp coverage. Led me to write a rare letter to my senators about exploitation of immigrant labor.

    One additional oddity I noticed here: a lot of hand built roof systems. A lot of builders don’t use engineered trusses. I cannot remember the last time I saw a hand built roof in Colorado or the Pacific Northwest. This is a labor intensive way to put up a roof. So, IMHO, low labor cost allows the builders to build a less capital intensive home. Not sure where else this is common. I do believe that if labor costs were higher, residential construction could be much more labor efficient.

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