BLS data on Nonfarm payrolls is out, and its fugly: NFP fell 17,000 in January — the first decline since August 2003 (-42,000).
Health care, retail trade and leisure were up, manufacturing, construction, financial services and government were down.
January’s Birth/Death adjustment has been traditionally negative, as it reflects the layoffs and closings of holiday seasonal business. In January 2007, it was -175k. In January 2008, it leapt to -378k.
The other news is the Benchmark revisions to the full 2007 year employment data. (There were also changes in industry classifications, seasonal adjustments). Also buried in the benchmark revisions, were refinement estimates of new business creation (aka B/D). It will take me some time to plow through all of these, but the takeaway was a major downward revision of 2007 Establishment surveys (NFP) by 376,000. Additionally, the Household survey showed downward revisions to both employment and the size of the labor force. The source of the revisions is the Quarterly Census of Employment and Wages (QCEW).
The bottom line: Job creation in 2007 was weak; it was especially punk in the latter half of the year.
Here’s my favorite line from a Bloomberg column:
"None of the 80 economists surveyed by Bloomberg had predicted the decline in payrolls, which was the first since August 2003. The median forecast in the survey projected payrolls would rise by 70,000, compared with an initially reported gain of 18,000 in December. Forecasts of an increase ranged from 5,000 to 160,000."
None.
Now let’s add some color to that. Consider this recent article: U.S. Will Escape Recession, Economists Say in Survey. This group is a reliable fade. Based on that survey alone, I am going to raise my recession forecast from 80 to 90%.
Charts courtesy of Barron’s Econoday
>
Sources:
THE EMPLOYMENT SITUATION January 2008
BLS, February 1 2008
http://www.bls.gov/news.release/empsit.nr0.htm
Benchmark Article
Daniel Jackson
BLS, February 1 2008
http://www.bls.gov/web/cesbmart.htm
PDF version
http://www.bls.gov/ces/cesbmart.pdf
Related:
U.S. Payrolls Decline for First Time in Four Years
Bob Willis
Bloomberg, Feb. 1 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=a6RXEUjetyGE&
U.S. Will Escape Recession, Economists Say in Survey
Shobhana Chandra and Alex Tanzi
Bloomberg, Jan. 9 2008
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEX73qWiBrb4
I find it interesting that leisure — of all things — is up.
Bloomberg needs to find better economists, as anyone who resides in the real world can see the effects of the slow down. Are real estate “For Sale” signs invisible to economists?
The economists are living life in another sort of bubble.
In an economy that has been goosed to the extent it has by MEW and real estate transactions–to the extent of two or three trillion a year (or more), how is it possible that they would’t think an economic slowdown (collapse, more likely) when the party comes to an end?
Endanger 10-20% of the economy–what do you think about that? A mere flesh wound?
How stupid, obtuse, or wilfully blind is that?
y/y employment growth is 0.7% and the 3 month moving average is now under the worst of the 1996 softlanding, in other words the only time employment growth has been this week is during recessions.
only 56.3% of firms returned their surveys, this is pretty cyclical, I’ve got a chart on it.
Jobs were negative in August of 2007 and Sept of 2005, but later revised away. So I wouldn’t make too big a deal about this early negative number, but the overall number of jobs y/y is a disaster. Absolutely zero doubt we are now in recession
I’m reposting this from the prior thread, just to cheer you up and negate the hand wringing and wails…
I don’t feel very profound today. But I do want to brag. Hey bears! I’m up YTD, well in the green. I don’t talk percentages, except with family. But I’m happy. No, I’m not up a mythically gigantic amount, but it is well above nominal. More than enough to happy dance.
I went to 100% cash in Nov 2007, went long near the bottom, and bought more as the market settled at the bottom, well diversified. Looking forward to a great February. There is still A LOT of up left.
Should we simplify everything by recognizing the fact that all of the numbers are fraudulent, and that they have been intentionally skewed in order to advance political and/or financial schemes?
Who didn’t know these numbers were wrong when they were first released?
Who trusts any of the numbers currently being foisted on the public by government and the financial industry?
These two entities have merged into the failed political system we call Fascism – they have become one. We are not being shown statistics, we are being shown propaganda.
Incompetent Fascism, at that.
What’s a “recession?”
In my econ 101 course, a recession required shrinking GDP. Has the definition been recalled?
Is it possible we could have little job growth and STILL not have negative GDP?
And suppose we do have negative GDP…what’s “bad?” -2%?
Again, it is amazing to me that some on here veritably root for a “collapse.”
C’mon, cinefoz – tell us some percentages! We’re like family!
Show us your personal financials, for god’s sake!
We need to know!
cin-
I am up too. Doesn’t negate the fact that I am looking for a recession here or another drop in the market. I am just trading it. No big deal and nothing to brag about.
Tyler Cowen had a blog entry at Marginal Revolution just a little while back … about how European economists were predicting US recession, but the US economists were not.
The consensus over there at MR seemed to be that week-kneed Europeans had no confidence in the US economy.
I made some comment that we in the US had a tendency to put a good face on things, and make our (public) predictions with an “if all goes well” attitude.
I’m increasing my depression forecast from 20% to 30%.
Karl K:
The definition of recession hasn’t changed, but the numbers used to measure recession have.
No one here roots for collapse. They root for an end to fraud. They root for the return of honest accounting. They root for stability and responsibility. They root for conservative values in finance (real conservative values, not insane libertarian values dressed as conservative values). They root for the return of the day that obscene greed and wealth were not the be-all, end-all point of people’s lives.
If the truth is that the foundation is cracked, and the house is collapsing, we cheer for the day we can start rebuilding – correctly.
Quaint, huh?
Ah hell, quit reading tea leaves. We have been in a damn recession since last summer.
Does this mean the markets go straight down? Of course not. Big counter trend rallies are the norm. Take advantage of both QID and QLD……
If you got em, trade em.
Another month like January and I’m goin fishin for the rest of the year.
Ross:
Funny site!
Marcus, GREAT POST.
It’s not rooting for a recession to want to know the truth. And even if the payroll numbers weren’t as unreliable as they are, the money by which we measure recessions has also become a fraud.
Recessions still are defined as two successive quarters of negative economic growth, i.e., contraction, but if one also accounts for population growth (approx. 2%?/yr), anything less than that means on average we are getting poorer.
I went cash mid-year 2007, but now I don’t know where to go. Any ideas?
None of the 80 economists surveyed …
so do these paper pushers get the Ben Stein treatment?
Precious metals (monetary), energy, agriculture, foreign currencies. DYODD.
apparently if you are not out waving the red, white and blue you are postulating for a recession. Thanks to people like Kudlow that is how reality is treated.
Sorry that ah…’ain’t it.
OT:
Don’t ya love how retail got piled into YHOO this morning and then 23 minutes in it gets downgraded…….
Another 100 points on all this “great news”
What happens when something really goes wrong…..LOL
CIao
MS
Gold just fell off a cliff…why? Let me investigate
One could find some more details on future revisions of labor force related data in
http://www.bls.gov/cps/eetech_methods.pdf
Market could crash here…I have a funny feeling…look at gold on no news. This rally is ridiculous. If Dow 12000 breaks, it will hit 9800 very fast.
Look at Dow chart…right shoulder top right here. Aug and Nov lows are right around here too and are serious overhead resistance. Ominous.
Head and shoulder
on Gold:
My guess is that some bank (most likely Spain) is dumping yet again. They actually back up the printed money with a real asset…funny that…..like for like.
Ciao
MS
cinefoz..
so you are saying that rally is not over yet.
and you are saying you knew about yahoo & msft deal, due to which we are having a rally despite bad job numbers?
and maybe your crystal ball is telling you that we will get more news like Yahoo & msft, or something based on which market will go up, despite bad economic data?
techy2468,
No, I didn’t know about any merger. The state of the stock market is as plain as the nose on a person’s face.
Assuming away a random event that causes a downturn, this is a normal bottom and a normal upcycle. It is a good time to buy stocks now. At some point, possibly this spring or maybe not until summer or fall, it will be time to sell. And thus goes the great cycle of stocks.
All this crap about larger than life effects that transcend the market are what keep analysts in business. Here’s the secret …. it’s only an oscillation within a trend.
Fortunately, nobody believes it is really that simple.
It helps to have a strong understanding of monetary theory, macro & micro economics, international economics, psychology, accounting, finance, statistics, a natural aptitude for pattern recognition, and the ability to see an event in abstract terms and transform it into something universal. You also have to know your limits and stay within them.
Hope this helps.
Marcus Aurelius wrote:
No one here roots for collapse. . .
If the truth is that the foundation is cracked, and the house is collapsing, we cheer for the day we can start rebuilding – correctly.
OK, so let’s see if I get your logic. Work with me here.
You’re not “rooting” for a collapse. But you will “cheer” when you can start rebuilding the house, which will occur after the “collapse”?
Is that right?
“Cognitive dissonance” doesn’t begin to describe what goes on in some craniums.
It’s not cognitive dissonance. If you see the foundation is rotten, you know the house will collapse no matter what you do or do not do about it. So you can either deny the obvious, or you can start planning for the future when the inevitable occurs. You might feel badly about the house collapsing, but you can cheer the inevitable rebuilding that will then take place.
Why is a “collapse” inevitable? Who says so?
YOU?
And should we do nothing to forestall even the remotest possibility of a collapse? We should just watch?
Let me go slow for you:
A. . . collapse….is ….a …really …bad …idea.
Look, I have no problem with a bear market. I have no problem with asset writedowns…a lot of them. I have no problems with some firms going bankrupt.
But I have a huge huge problem with a total market collapse and a credit market meltdown.
Trust me..you do not want to see this happen.
I was using the word “collapse” in the context of the house metaphor. Houses do not fall in value when their foundation is rotten — they collapse. In the context of the financial markets, I don’t want a collapse nor do I expect one. I do expect a large market correction over a period of months, maybe a year or two, because the foundation of today’s financial markets is rotten. But since there are enough anxious groups working hard to prevent a collapse, I do not think we will have one.
And I certainly am not rooting for one. I would have a huge problem with that as well. Nevertheless, there are pockets of financial rottenness that must be cleaned out of the system, and until they are cleaned out, the foundation is not solid.
“it was especially punk in the latter half of the year.”
That would be about the time alot of us on this blog were fairly sure that the country had entered a recession. Kudows to all!!
Barry, your comments about revisions of total employment vs NFP seem to indicate that you don’t understand the gory details of these two series. The total employment is based on the monthly CPS–the sample data is applied to population estimates. When these population estimates are revised, then the total employment number gets revised. The sample is so big, and the changes so predictable (people don’t die off in hordes when there’s a recession) that sample error is relatively small.
The NFP is also based on a monthly survey, but then it is revised because we get the universe of employers reporting their employment numbers when they file their quarterly unemployment insurance tax returns, which are processed six months after the fact. (As an economist for a state employment department, I have a database with monthly employment for every employer in the state, currently through June 2007.) The sample error, which can be large for the initial estimates because of relatively unpredictable changes, is then eliminated.
My state now benchmarks quarterly instead of annually to lessen the error that can build up over a year.
Really? Where does my misunderstanding lie?
I’ve written extensively about BLS, the CES and CPS surveys, the B/D adj to NFP, and QCEW review.
Please have a look at the 100s of employment related posts over the past 5 years on the subject, then get back to me as to where I may have run amiss.
BLS
If we can’t define with shureness the number of illegal immigrants in the USA (12 to 20 mil)
How can we define the number of
off the radar inhabitants
living with parents, friends, gangland barracks; and literally on the streets?
duh – sureness
Shure is a brand of microphone
There’s no continuous place to post ecnonmic data here, so old MISTAKES on the Blog just get buried in the blizzard of new blog posts.
After mischaracterizing inventories recently on the blog, we see the other piece of information coming in:
“The ISM’s main manufacturing gauge for last month, based on a survey of purchasing executives, rose 2.3 percentage points to 50.7, putting it back into expansionary territory. (Readings above 50 indicate growth.) The gains came largely from increases in new orders, production and inventories.”
http://blogs.wsj.com/economics/
So….while everyone already knew about the flat spending and “jobless recovery” etc, it does indeed turn out that the economy is not predictable according to past patterns.
Thus the thesis here is questionable, but I doubt the blog here will ever really look for contradicting information.
That’s suggests to me I have to see the blog as slanted and account for that.
Context for above:
I expect a deep recession, for the reasons pointed out here and elsewhere repeatedly.
Those are important and need follow up, and this blog does it well.
But….
It’s *because I expect deep recession that I search carefully for why it may not happen*.
That’s “objectivity”. It’s trying to check your theory instead of trying to defend it.
In an “objective” method, you seek out information that contradicts what you think also. You get all types of information, not only types that accord with your previous predictions.