NFP December 2007

Once more unto the breach . . .

This morning is the "all-important" December 2007 Non-Farm Payroll reports. Bloomberg’s survey of 74 economists expects payrolls to rise by 70,000, with the jobless rate increasing  a tick to 4.8%.

I put "all important" in quotes, because, as regular readers of The Big Picture well know, we look at this report quite askance, given how unreliable the initial numbers are.

Indeed, today, we get the revisions covering the last five years of data for the household survey which measures the unemployment rate. (The full benchmark revisions for the establishment NFP data is next month).

It has been my position that the increasing proportion of Birth Death jobs as a total percentage of NFP has rendered the BLS data meaningless. The straight line extrapolation of the B/D adjustment is, by design, unable to catch any change in economic direction. Hence, the absurd determination that 199,000 small business construction jobs have been created since January 2007.

Consider: The B/D generated 1,239,000 jobs from February thru November 2007. That’s rather surprising, since the total NFP jobs created since January 2007 was 1,208,000. In other words, the Net Birth/Death jobs created over 10 months was actually greater than the total NFP jobs created in all of 2007. That’s rather odd, don’t you think?.   

There are still some stalwarts and innumerics who contest this issue, but I find that data point rather convincing.

The BLS NFP Birth/Death adjustment is the statistical equivalent of CDO pricing via mark-to-model. The idea is to approximate an unknown variables value as close to possible via measurements. The mark-to-model method is deeply, inherently flawed.

When we look at some other measures of employee/consumer strength — Late payments on loans hit a post-2001 high and Consumer Bankruptcy Filings Rose 40% in ’07 — it makes us question any number claiming broad job creation . . .

>

Sources:
Hiring in U.S. Probably Slowed in December, Unemployment Rose
Bob Willis   
Bloomberg, Jan. 4, 2007
http://www.bloomberg.com/apps/news?pid=20601068&sid=a4Vujb8Xyfhk&

Late payments on loans hit a post-2001 high
Associated Press,January 4, 2008    http://www.boston.com/business/globe/articles/2008/01/04/late_payments_on_loans_hit_a_post_2001_high/

Consumer Bankruptcy Filings Rose 40% in ’07
WSJ, January 4, 2008; Page A4
http://online.wsj.com/article/SB119940365489166213.html

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What's been said:

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

    jack bouroudjian aka bagdad bob…make my day…i need a good laugh today

  2. Fomerly known as… commented on Jan 4

    It’s not the number of jobs created but the quality of jobs created that matter. We could create 100M minimum wage jobs but what good is that for the economy? Especially when those low wage workers get access to easy credit and go deep into debt.

  3. Eric Davis commented on Jan 4

    oops, glad to be short today…..

    *waiting for the spin*

  4. LewDunbar commented on Jan 4

    Smells like a recession to me. How will Larry Kudlow defend his “Goldilocks” economy today.Greatest story never told ? My ass.

  5. Neal commented on Jan 4

    Woohoo, the economy is strong ansd still growing, 17K, fabulous.

    A perfect end to a perfect administration.

  6. zell commented on Jan 4

    The greatest move today will not be in the #’s but in the movement from mythology to reality- cold and hard as the winter freeze.
    Start with robust employment being the foundation of a robust consumer.

  7. Winston Munn commented on Jan 4

    Although I agree with Barry that a poor B/D model makes these figures unreliable, I wouldn’t get too excited by today’s poor showing – revisions, don’t ya know.

    Besides, these numbers don’t jive with the reduction in numbers applying for unemployment.

    I would not be surprised at all to see a revision to close to 100K.

    However, 17K does set the stage for an emergency rate cut session.

  8. scorpio commented on Jan 4

    combine this w the Democrats throwing off the lead weight of Clinton. change is comin’

  9. fenner commented on Jan 4

    Holy Moley, the economy is going to hell and a hand basket and the Bush administration just trotted out Nosferatu on CNBC!

  10. Eric Davis commented on Jan 4

    fenner:

    that one got me…. that was funny.

  11. Steve Barry commented on Jan 4

    Lew,

    Larry Kudlow, and I hope he reads this, lost all credibility when he said that the recent round of rate cuts, started in September, would lead a dollar rally. Last night he said high oil was bullish.

    Hey Papa Bear Kudlow…I am on record on this board saying that 2008 will likely be the worst year in S&P history, beating the -43% in 1931. If I’m right, I want to be a guest on your show for the best call ever. All I need is for the S&P to have a historically high P/S of 1 on 900/share in revenue. Seems like a piece of cake.

  12. DavidB commented on Jan 4

    GM says U.S. economy will avoid a recession in ’08 (Reuters)

    BWA! HA! HA!

    That probably seals it!

    It is better to be silent and be thought of as a fool than to open your mouth and prove it GM

  13. Steve Barry commented on Jan 4

    Phil Orlando on CNBC…”recession is great for market…means Fed will cut rates”

    That’s like saying cancer is great, we’ll get chemotherapy.

  14. michael schumacher commented on Jan 4

    Watch out for Helicopter Ben……this smacks of setting up for an emergency rate cut.

    Today’s repo oversubbed by a factor of 10 (at least the first one is) Another one to close in a few minutes.

    http://www.newyorkfed.org/markets/omo/dmm/temp.cfm

    Usually the Fed does 2 on Thusday’s……it must really be getting desperate…

    Nah….It’s all contained said the nice man on the radio.

    Ciao
    MS

  15. Marcus Aurelius commented on Jan 4

    I can’t wait until the “pull yourself up by your own bootstraps” crowd has to face the facts and the cold hard reality described by zell, above.

    To all of the ranchers out west who lease Federal land at one-eighth of the cost of maintaining the land: Oops! You aren’t so self-sufficient, now – are you?

    To all of the mortgage brokers who drive $120K Mercedes and invent ways to divert money from the stream while poisoning everything downstream from them. Guess what, buddy – you’re walking now and drinking you own waste like the rest of us.

    To all of my homebuilder friends who acted as if they were gifted capitalists on the way up, entitled to an unbroken stream of income during the downturn, and who will will be whining like babies when they have to face the real world and must prove they can work hard every day to stay alive. You guys deserve exactly what you get, and there will be no sympathy and no mercy.

    The bottom is level – no peaks, no valleys. This is what I have waited for all of my adult life: a level playing field. Bring the fat boys on!

    This a golden opportunity for anyone who understands how redistribution of wealth works. We’re getting ready to learn the true meaning of “conservative”.

    Stay frugal, stay alert, stay on your feet, and prosper.

    Now, I need some coffee.

  16. michael schumacher commented on Jan 4

    well said Marcus…..

    But you know those fat boys will get rescued at some point…….count on it.

    Ciao
    MS

  17. The Big Picture commented on Jan 4

    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 L…

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