Very interesting NFP report today, with all sorts of cross currents at play. The consensus of Wall Street economists is for the unemployment rate to
remain at 4.6% for August, while Nonfarm payroll growth is seen at 112,000 — marginally
stronger than July’s 92,000.
As noted yesterday, Back-to-School Sales were surprisingly strong. And credit crunch notwithstanding, the global boom continues.
Closer to home, things have been murkier. The ADP Employment change was a mere 38k — that has lowered expectations, as have all of the huge layoffs in the mortgage and banking — the Financial sector accounts for about half of the total mass layoffs.
BLS keeps showing an unfathomable construction jobs growth , which I suspect is a function of their wildly-optimistic-guaranteed-to-miss-turning-points Birth/Death Model adjustment. The gross gain last August was 122k jobs; since it appears to be rather seasonal, we should expect a nice B/D bump this August also.
Considering how much softer the economy has been much in 2007 than last year, it is simply unconscionable that the B/D model has actually created more jobs in 2007 than it created at this point in 2006.
Year Jan Feb Mar Apr May Jun Jul
2006 -193 116 135 271 211 175 -57
2007 -175 118 128 317 203 156 26
Hence, we need to consider two factors: today’s reported number, and that ongoing physical construct called reality.
It would not shock me to see an upside surprise in the official reported number today. 120k – 180k is certainly a conceivable outcome from the model. Hell, if BLS’ model can generate data saying construction jobs are growing, than why not even 200-220k new jobs?
The real numbers on the ground are very different. In addition to the punk ADP report, and the massive Challenger layoff numbers, we continue to see other leading employment indicators softening: The online job listings (showing more people looking for work) and temporary help index. The charts of temp help firms like ManPower (MAN) look pretty awful. Also, Continuing
unemployment claims continue to tick higher — the WSJ reported they "hit 2.598 million in the week to Aug. 25, up 5% from a year
The Fed will obviously be watching this data point, but one number is far less significant than the overall trend — and that has been a gradual decrease in new job creation over the past 3 years.
I’m out of pocket most of the morning, so I may not get a chance to update this until much later today . . .
UPDATE: September 7, 2007 3:15pm
Helluva day to be out of pocket; Dow is off 240 as I type this; Gold is rockin.
A loss of 4,000 jobs — the first negative number in 4 years — pretty much gives the begging/pleading crwod what they want: a very likely 25 bps cut.
Once I get settled, I’ll update payroll and expand on yesterday’s same store sales data.
Market Spotlight: Staffing Companies
Analysts Forecast Tough Times for Staffing Companies As Housing, Credit Problems Continue
AP, Thursday September 6, 3:41 pm ET
How Job Report May Be Masking Labor Pains
WSJ, September 7, 2007; Page C1