NFP = 18,000


Wow, that’s a pretty ugly chart above.

Here are the details, via BLS:

"The unemployment rate rose to 5.0 percent in December, while nonfarm payroll employment was essentially unchanged (+18,000), the Bureau of Labor Statistics of
the U.S. Department of Labor reported today.

Job growth in several service-providing industries, including professional and technical services, health care, and
food services, was largely offset by job losses in construction and manufacturing.
Average hourly earnings rose by 7 cents, or 0.4 percent."

So, December NF Payrolls rose much less than
expected, up a marginal
18,000 — or as BLS described it, largely unchanged — versus a consensus of 70,000. This was the lowest reading since August 2003. Construction job losses are now finding their way into the data, regardless of the aforementioned Birth Death adjustment.

Unemp_dec_07Unemployment rate rose
to 5.0%, the highest in 26 months. As we have noted repeatedly in past months, to keep up with population growth requires ~150k new jobs to be created each month. Given the number of months we have seen below that level, an uptick in unemployment was inevitable.

The spin coming from the usual sources will be that this poor showing was the result of the August credit crunch, and is therefore likely to be a temporary phenomena.

I disagree. 

Fed_inflationThese same folks will point to the increasing odds of a 50 bps cut at the January meeting. Those futures have risen to 44% from 36% yesterday. Unfortunately, the Fed finds itself somewhat hamstrung by elevated inflation, $100 Oil and $850 Gold as signs proof of inflation.


Coming on top of the slowing Housing market, weak income levels, ISM manufacturing index, and auto sales, this is further evidence to the building thesis that a recession is increasingly likely.



Employment Situation Summary   

Fed’s Inflation Fears Might Trump
Calls for Another Big Rate Cut Monetary-Policy Makers
Appear to Have Less Room To Maneuver Than in Past

WSJ, January 4, 2008; Page A3

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What's been said:

Discussions found on the web:
  1. David commented on Jan 4

    Hmmm. If people are out of jobs, how will they pay the mortgage on a house that’s priced at 10X their former income?

  2. Michael Donnelly commented on Jan 4

    A recession is coming? How about a recession is already here.

    List all the times the unemployment rate has risen 0.6% and not resulted in a recession. That’s right never.

    CES employment growth rate is 0.97% y/y what was it at the start of the 2001 and 1990 recession ? 0.86% and 1.6%

    Maybe it’s still a soft landing? At the worst point of the 1995 soft landing it was 1.6%

    I’m surprised it’s a debate at this point.

  3. Paul commented on Jan 4

    Somebody start turning over rocks. We need to get Kudlow on the air right now!

  4. michael schumacher commented on Jan 4

    I bet traders wish it was a half day like Japan…and they still lost 4%

    BTW the above chart is an Option Arm reset guide to where they are most prevalent…sorry did’nt put that in the original.


  5. scorpio commented on Jan 4

    no matter how profligate the FRB will be in terms of supporting Republican reelection chances thru seriatim rate cuts in 1H 08, the bell will toll beginning the day after the election, no matter who wins, Rep or Dem, as FRB will raise rates dramatically post-election to cure their bad bad bad recent decisions (1995-2007) and try to get a grip on the economy once more. just like Pandit and Thain, they’re gonna have to clean up a 10-yr mess early as possible in the election cycle. that’s when things get really ugly.

  6. Curt Smith commented on Jan 4

    I wished that the lie within the Hourly Earnings was exposed. IE that it includes wall street’s out sized bonuses (and the like) swamping out Mr Poor who’s downsized from white collar to burger flipper. Most state employees haven’t had the raises this stat shows (wife) and my IT contracting rates have dropped from 2000, so where is this 0.4% coming from?

    thx guys, curt

  7. dblwyo commented on Jan 4

    Here, hear. You and your readers might be interested to also know that, taking ~150K/mo as the figure of merit, that cumulatively we’re under-water about -2.3 million jobs since Jan00 but it’s about -6.7 million since Jan00. In other words all the talk about shifting long-term economics has meant job creation hasn’t kept up with labor force growth (it’s twue, it’w twue) but your comments about non-organic growth in this cycle are really coming home to roost. Put that together with the other points about wages, payments and so forth and whatdya got ?

  8. The Financial Philosopher commented on Jan 4

    I find it interesting that the increased likelihood of an aggressive Fed cut has not inspired “The Bad News Bulls” to come in and buy.

    I am not one to predict but I will observe that, at a minimum, the market sentiment is markedly different now than it was in Q-4 2007…

  9. OldVet commented on Jan 4

    Fed in helicopter pad loading cash right now. What credibility would it gain by acting tough now, this late in the game? Rate cuts are highly likely given the employment part of Fed mandate, and they’ll (try to) deal with inflation later. They’re more worried by deflation than inflation at this point, with credit markets still mostly frozen and bank losses still not fully reported. Plus bad asset-backed secutities from credit cards, auto purchases, and commercial RE yet to come. IMHO.

  10. Karl Smith commented on Jan 4

    Barry, something to keep in mind is that the benchmarking is likely to take the level of jobs down significantly.

    Like most backward looking statistical models, the BLS job creation model has a hard time identifying turning points.

    Look at how hard it is for us as human beings to identify turning points and the add in the fact that computer can’t ask his neighbors kid whether things have been rough out there for recent college grads.

    I think we all believe that job growth has turned and the benchmarking should indicate that the turn is tighter than originally estimated.

    I am wondering how the market will react. I was just a wee-pup last time we went through a turn so I didn’t get to see how seriously people take the benchmark.

  11. Stuart commented on Jan 4

    BR, “The BLS NFP Birth/Death adjustment is the statistical equivalent of CDO pricing via mark-to-model. “.. kudos to you, I like that.

  12. Michael Donnelly commented on Jan 4

    RE: rising average wages

    Note the big increase in Construction wages, whenever you lay off 40,000 ++ of the guys building the houses you are left with the white collar folks who make more per hour, so the average rises.

  13. Francois commented on Jan 4

    EconSpace: Houston! We a have recession! Do you copy Houston?

    Houston: Huh? (grrrchht! touiiiiiit!)* R u talking to us?

    *Spin-driven interference

  14. New Yorker commented on Jan 4

    Hell of a job there President Governor Bush. Heckuva even.

  15. Eric Davis commented on Jan 4

    What will sicken me is, we now will hear 20 some odd days of (50 or 100 pt rate cut)

  16. Francois commented on Jan 4

    I was listening to David Cay Johnston’s interview with Terri Gross on Fresh Air yesterday, about his new book “Free Lunch”. Highly recommended read BTW.

    Basically, Johnston was describing how the laws and tax system have been re-written to favor a very few at the expense of everyone else in America.

    While listening, I couldn’t wondering how our economy could have any sustainable power with such “a handcuffing of Adam Smith invisible hand” as Johnston elegantly put it.

    I guess that the NFP report coupled with its general trend of the last 7 years provided me with part of the answer.

    This mess that is our economy will turn awfully ugly soon.

    I do not envy anyone who wants to be President right now.

  17. Eric Davis commented on Jan 4

    Loved the convenient timing of the fed announcement, Fascinating how convenient it is to talk about the “Efficiency of markets” and “Brilliance of Capitalism”…

    But when the market is going down, roll out the “relative morality” and the PPT…

    it all goes to show what a shell game it actually is.

  18. Costa commented on Jan 4

    30 billion to the rescue!

  19. crg commented on Jan 4

    I know so many people in New York City getting laid off this month it’s ridiculous (all in the creative field).

    Sales in big money consumer industries had been going steadily down all year in 2007 across the board, even before the credit crisis thing started (which was mentioned in a blip in August). So, here we go.

  20. dark1p commented on Jan 4

    Costa–funny stuff!

    I’ll throw in my two cents in terms of earnings growth. I haven’t had a raise since 2000. My girlfriend just got a decent one, but she’s still behind since it was her first in about six years and didn’t make up the lost ground.

    And this is living in NYC as a renter, where our rent has gone up 40% over the same time period (and at 4 grand is actually still a deal, believe it or not).

    But, it’s Friday, which means it’s time to go out after work and enjoy a few $12 cocktails. Yippee.

  21. halbhh commented on Jan 4

    MD: small correction: you’d also want to hold onto to many of your top-skill workers, like master carpenters, etc, that are needed someday, far, far, far away, in the future. Of course, these guys are less numerous and make higher wages than the specialized laborers.

  22. John Badalian commented on Jan 4

    Barry- Excellent Article and thoughtful comments. Thank you all!

    Barry, perhaps as a way out of this quick sand, we should send our holiday credit card bills to the FED. We’ll all make sure to mark “AAA” on the envelopes! What do we get? 85c on the buck ? Also, we could put housing costs back in the inflation model, and dispense with Owner’s Equivelent Rent! Forget about the 200-400% run-up over the past decade! We’ll start fresh!

  23. Stuart commented on Jan 4

    The 30 billion is basically just another TOMO but sidestepping the PDs…no big deal. The fed has been draining liquidity. Amazing how many headlines report new injections but fail to report how the billions of expired injections they’re simply replacing, hence there really is no net injection gain.

  24. Michael Donnelly commented on Jan 4


    yep exactly right, you also tend to hold on to the site supervisors and senior end of the sales force. In other words, it’s the cheap labor that is hired first, so the average wage can rise for a time.

  25. D H commented on Jan 4

    I spoke with a good friend who is a health insurance agent who owns a kiosk at the largest mall in my region. While we were talking she happened to mention “the bad economy” and I said, “What makes you think we’re in a bad economy?” She proceeded to explain how many people have lost their job at the mall, how many kiosks (including Dell and US Cellular) have closed, and a laundry list of clients and prospective clients who have been talking about losing jobs.

    I know this is completely anecdotal, but it struck me as potent information given that I don’t get her type of exposure to the masses.

    Anyway, thought I would share …

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