Today will be quite the interesting Non-Farm Payrolls report. Consensus is for 127,000 new jobs, with a range of 60,000 to 160,000.

Why "interesting?"

Well, first, there is a general economic gloominess amongst the populace, as reported in yesterday’s WSJ/NBC poll. There is "broad public pessimism," and while  at least some of it is related to Iraq, that hardly explains the deep and broad negativity. (I disagree with NRO’s Jerry Bowers, who claims its a market sentiment buying signal). Two thirds of Americans beleive we are in a recession right now, or will be within a year. It is simply hard to imagine robust job creation occurring with that sort of widespread sentiment. 

Second, there was the rather sour ADP Report (chart). A month-over-month gain of 48,000 new private sector jobs is fairly punk. Unless the government itself created 100k new jobs — suspect tho that might be — we are set up for a disappointment. 

Lastly, there is the Birth/Death factor. January and July are the two months of the year where BLS puts this hypothetical job creation machine into stasis for a month due to seasonal factors. We typical see a negative or flat B/D number in January and July.

Why does this matter? As we noted in The Accelerating BLS Birth/Death Adjustment, this adjustment has been an increasingly large proportion of BLS reported NFP.  In 2006, it was responsible for a large minority of BLS reported new jobs. In 2007, the B/D adjustment is responsible for more than half of all new reported jobs!   

The report is out in ten minutes . . .

UPDATE August 3, 2007 8:58am

Nonfarm payrolls increased 92,000 in July (down
from 126k in June). The unemployment rate rose 0.1 percentage point to 4.6%. Prior months were revised down by 8k. Monthly job growth has averaged 136,000 so far this
year. Employment is now growing at a slower rate than population growth. 

The birth/death model added just 26k, way below recent averages.

The WSJ reported that "Stocks may slide
early Friday after a weaker-than-expected July employment report,
raising fears that troubles in the housing market may be spreading."


America’s Economic Mood: Gloomy
WSJ, August 2, 2007; Page A4

ADP Report
Wednesday, August 1, 2007, 8:15 am EDT

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What's been said:

Discussions found on the web:
  1. Peter commented on Aug 3

    The y-t-d avg gain in payrolls is 145k vs 189k in ’06. The unemployment rate is expected to remain unch at 4.5% with average hourly earnings expected to rise .3%.

    This is obviously a pre credit market selloff # so it should not be taken as an indicator of growth for the next few months BUT it will at least give us a snapshot of the state of the US economy before it enters even more uncertain waters.

    Global contagion of the credit turmoil has impacted Germany’s 3rd largest mutual fund which stopped redemptions after losses. UK house foreclosures reported for the 1st half of ’07 is at the highest since 1999.

  2. SPECTRE of Deflation commented on Aug 3

    Lastly, there is the Birth/Death factor. January and July are the two months of the year where BLS puts this hypothetical job creation machine into stasis for a month due to seasonal factors. We typical see a negative or flat B/D number in January and July.

    After seeing what they did to the personal savings rate data [oppsy…they now say we weren’t negative], I’m certain the Wizard of Oz can conjure up any number that is needed to keep the sheeple and shills happy.

    This is all becoming too surreal.

  3. jake commented on Aug 3

    good call mr. ritholtz….

  4. Chief Tomahawk commented on Aug 3

    I think Jerry Bowers is working with a broken compass.

  5. Michael Donnelly commented on Aug 3

    Ok, Fun Birth/Death Fact of the day.

    What is the average B/D number for July? Excluding today’s report the average preliminary B/D number is -50,000, the average post benchmark number is -48,000.

    Using the -50, what would today’s employment number be ??? 16,000 net new jobs. The economy is on fire.

    Oh, but we didn’t use the -50,000, instead the BLS guessed we added 26,000 in a slowing economy. (8,000 were added in construction, btw)

    That’s a swing of 76,000 jobs. And remember the -50 average for July is an average of 2002-2006. Years the economy was clearly in expansion…..

  6. KP commented on Aug 3

    Have a look at your plumb-bob’s ladies and gentlemen, The Titanic is “changing course”.

  7. Michael Schumacher commented on Aug 3

    gap the market up on two consecutive days towards the close so that when we release the NFP that are not very good then it will give back about half of that gain but keep the “trend” intact…..did you hear something???Is this thing on?….got it? good now get back to work….

    Hank Paulsen’s conference call from Weds.night


  8. Michael Schumacher commented on Aug 3

    the game with the NFP is just so obvious now.
    You see they can’t continue to show a labor market that is too hot because that would imply a tight labor market and then that would mean that real wages should rise to off set the lack of workers for “all of these jobs”….the kicker of it is that the Fed is reluctant to show ANYTHING that has to do with inflation ala real wage pressure because that would continue to contribute to overall inflation that, according to the fed, does’nt really exist.

    The SP are giving the same signal as in March that should create a bounce but it just may be different this time. Good summary here of the action at this site:


  9. The Financial Philosopher commented on Aug 3

    My recent observation is that conflicting “media noise” volume has a positive correlation to market volatility and uncertainty. Perhaps Barry or a TBP reader can help me with the conflicting reports and news headlines: If 2/3 of Americans feel “gloomy” then why would pending home sales show a “surprising gain” in June?…

    And the most recent measure of consumer confidence was high…

    As Barry has commented before, it may be time to “lose the news” for awhile so we can gather our wits again…

  10. John F. commented on Aug 3


    If you’re going to start using sentiment polls from the major media outlets to predict economic data, may merciful Allah stand guard over your clients’ money. They are volatile, full of confounding factors, and easily manipulated. It’s an exercise that sets off all the confirmation bias alarms. Please don’t go down the Bill Gross road and add ideological wish fulfillment to the mix: his recent cri de coeur was much too self-indulgent for someone with his track record of the last few years.


  11. Michael Schumacher commented on Aug 3

    I know you are aware of this but:

    >>The National Association of Realtors’ pending home sales index >>

    That tells you ALL you need to know…


  12. Francois commented on Aug 3

    “If you’re going to start using sentiment polls from the major media outlets to predict economic data, may merciful Allah stand guard over your clients’ money.”


    Very well put John F.. Thanks for the good laugh…even this is a serious matter

  13. donna commented on Aug 3

    A friend of mine in L.A. was just laid off today after 20 years with his company.

    This year is gonna suck for so many people….


  14. Winston Munn commented on Aug 3

    I actually see a way there could be a modicum of truth in the BLS unemployment figures – after all, people do have to eat.

    Offshoring has expanded the labor pool; therefore, it is almost impossible to create a labor shortgage that would drive up wages (even more true when the competition is willing to work for 50% or less his U.S. counterpart.)

    Because eating is still high on most people’s list of things to do, jobs are a necessity. But it is a service industry job for most. Therefore, you end up with a decent unemployment figure but a declining median income figure – go figure.

    With no real wealth produced, the nation turns to pseudo wealth – wealth created by playing games with money. However, because no true wealth is being created, a polarization occurs – the rich gain while the middle and lowers classes (having no trickle down effect from LBOs and such) have to settle for a lowered standard of living.

    The U.S. consumer is not going quietly on this front, resisting the Brazilianization of the U.S., but is running out of credit bullets to put into his empty, borrowed gun.

  15. The Big Picture commented on Aug 6

    A Closer Look at July NFP (or, true UR = 5.4%)

    Officer Barbrady, I call shenanigans! Friday’s Non-farm payroll passed with very little commentary, as many have been otherwise distracted with the credit meltdown and increased market volatility. As I explained early Friday morn, I expected a punk emp…

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