Negative NFP Expectations

A few quick thoughts on this morning’s NFP data:

Today’s number has a consensus forecast of minus 70k 50k, but as we’ve stated ad nauseum, a single data point matters much less than the overall trend. And as anyone who looks at the numbers knows, the trend has been down.

Secondly, Vince Farrell mentioned on K&Co. Tuesday that the 2001 recession saw 200k job losses every month, arguing that since we’ve been nowhere near those numbers, ipso facto there is no recession.

The problem with this analysis is the difference in job creation between the 1994-2000 versus the 2003-08 cycle.

We regularly produced 300-400k monthly new jobs during the 1990s  boom. The current backwards, cheap money, real estate-driven cycle has produced the least amount of jobs of any recession-recovery period post WWII.


Chart courtesy of Spencer England’s Economic Review (SEER)

Its no surprise that very weak job creation would not generate the sale sort of recessionary layoffs we saw after a much bigger jobs boom.

Lastly, the ADP data: The WSJ reports this morning that since November, ADP has been off by over 100K jobs per month. One possible explanation I have read elsewhere (the Liscio report?) is that of all of the non-government jobs, over 20% have come from government contractors and defense department outsourcing.

As we know, what the government does is not reflective real world economic conditions, so perhaps that is skewing the ADP data.


Bottom line: The trend is not friendly. Look for ongoing weakness, regardless of todays soon to be revised, B/D skewed  release.


UPDATE: April 4, 2008, 9:14am

March Payrolls fell a greater than
expected 80k, 30k more than expected. The unemployment rate rose to 5.1% from
4.8%, the highest since post-Katrina Sept ’05.

After falling a sharp 450k in Feb, the labor
force rose by 410k. Net revisions were negative by 67k so job losses have
averaged 77k over the past 3 months.

Net-net, the data speaks for itself and follows what is most rational on the
part of business, tighten the belt when things are




Job Market Hints Recession Has Started
WSJ, April 4, 2008; Page C1

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What's been said:

Discussions found on the web:
  1. Marcus Aurelius commented on Apr 4

    The weather man keeps telling me that it’s sunny and in the mid-70s, but when I look out the window…

    Who ya’ gonna believe – ADP, or your own lying eyes?

  2. Marcus Aurelius commented on Apr 4

    We’ve all seen the irrationality and denial on Wall Street.

    These are the top two headlines on MarketWatch:

    “Optimism reigns over jobs”

    followed by:

    “Grim jobs picture”

  3. Marcus Aurelius commented on Apr 4

    The headlines at MarketWatch just changed:

    Fitst, it’s:

    March payrolls down 80,000

    followed by:

    Optimism over jobs evaporates

    That’s what happens when one takes off the rose-colored glasses.

  4. grumpyoldvet commented on Apr 4

    CNBC has become a clown act…..Yea, Sis Boom Bah……cheerleading par excellence….Friday’s “Qwack Box” had music and singing…almost reminded me of an Andrew Lloyd Webber Broadway show….

  5. Jack Stevison commented on Apr 4


    January and February revised downward also.

    Recession still on.

  6. Joe Klein’s conscience commented on Apr 4

    Will the market open up 200 points today? Given the markets behavior lately, the up tick in the unemployment rate to 5.1 can’t be seen as anything other than a good sign.


  7. SPECTRE of Deflation commented on Apr 4

    At this point who doesn’t know the economy sucks? The market may have already discounted bad numbers on employment. We have moved 300 Basis Points for these very reasons.

  8. SPECTRE of Deflation commented on Apr 4

    Holding anything but ag commodities may become very painful. The world is slowing, as Germany reminds us this morning. Their exports suck!

  9. Not So Fast commented on Apr 4


    You need to be objective and to look at the rate of change. It is slowing, stabilizing, and not as severe as it was during prior recessions.

    The numbers suggest flat to slightly lower growth, not Armageddon that you are expecting.


    BR: 1) The rate of change is accelerating to the downside, not stabilizing. (How about a data source?)

    2) layoffs are not as severe as prior recessions because the hiring was so much weaker this past cycle. See chart above.

    3) I am not forecasting armegeddon.


    Misquote me again, and you lose commenting privileges.

  10. Steve commented on Apr 4

    Treasuries barely buding on the news. Right now the evidence appears to lay with those who say the worst has already been discounted.

  11. Stuart commented on Apr 4

    Agreed with earlier comments. CNBC has now fully evolved into shill network. Spin and pump. It’s embarrassing.

  12. Marcus Aurelius commented on Apr 4

    Posted by: Not So Fast


    How’s the Kool-aid this morning?

    I’ve never seen BR or any of the other “bears” (actually, they’re realists) call for Armageddon. In your brain-addled state, you seem to believe that the neocon trick of pinning a belief on your adversary – regardless of whether your adversary actually holds that opinion – is still a viable tactic for a valid debate.

    I suggest you “invest” heavily in financials and donate anything else you possess that is of value to the RNC.

    Enjoy your buggering.

  13. Winston Munn commented on Apr 4

    The sentiment I perceive is not about knowing the worst is over but about hoping the worst is over.

  14. Not So Fast commented on Apr 4

    Dear Bearish Kool-Aid Drinking Aurelia,

    We had a flat to slightly lower growth last quarter but it is behind us. We need to look forward now. Payroll is a lagging indicator and often bottoms during the recovery from a recession phase. For example, the best time to buy stocks was in 2003. In 2003 payroll was -200K (2.5 times lower of the current level).

    The rate of payroll declines is slowing, stabilizing, and not as severe as it was during prior recessions.

    It appears as the worst has already been discounted in the market. The stocks are very attractive. Moreover, Bernanke will cut rates again.

    BR: Imagine a hypothetical recession, one that starts off mild, then accelerates to the downside. It gets worse and worse.

    In that event, wouldn’t you be saying the exact same thing? Last quarter’s numbers are lagging, its already priced in? Looking backwards and declaring the worst is over is not exactly insightful analysis.

  15. Ross commented on Apr 4

    From time to time you can find a few nuggets of wisdom on CNBC. Rare but important.

    Art Cashin, who has a good feel for the markets thinks we may trade higher for weeks or months but that the last bottom was a bottom, not THE bottom.

    Those with good chart sense might want to clip a few percent from the Goldilocksers.

    Be a good Spenglarian pirate. ‘Intervene amongst the interveners and gamble with money as a ware’

    Cash ain’t bad either.

  16. Mark E Hoffer commented on Apr 4

    I’ll posit the some unemploymet has its virtues: “Robert Mugabe’s aides have told Zimbabwe’s opposition leaders that he is prepared to give up power in return for guarantees, including immunity from prosecution for past crimes.”

    Maybe we should be as accomadating when Henry & Ben proffer such a deal..

    past that, Hayek, in his “Constitution of Liberty”, was right: “Employees are a threat to Liberty.”

  17. Pat G. commented on Apr 4

    The markets are shrugging off the NFP numbers and the big revisions to January and February NOT because as analyst’s imply (the markets are looking past the abyss to the recovery) BUT because the markets know that the government will do whatever it can either legally or illegally to prop them up.

  18. Marcus Aurelius commented on Apr 4

    Posted by: Not So Fast | Apr 4, 2008 9:34:49 AM

    Invest accordingly.

  19. lauteus commented on Apr 4

    Wouldn’t it suffice to say that the ‘bear’ mentality is getting crowded in the short market? If so, wouldn’t it also be fair to assume that the same greed driven views that created the leverage mess and that drives us and most others to ‘shop’ for higher returns on our investments is now, in fact, betting short and holding for a bigger return creating the fuel for these dislocated market moves as of late, regardless of the news.

    Yeah, the bad news and slower earnings are discounted alright. Not in price but in leveraged (short) bets that it ‘will’ be discounted and since no one wants to be the first off the boat (ever) the stubborn (‘greedy’) short position holders are creating these invariable pops with covering…

    Maybe, only one small tiny variable in this mess of many albeit a definate catalyst for some of the action.

  20. SPECTRE of Deflation commented on Apr 4

    MA, can leave politics out of a single post? Damn if you don’t get tiring with your drivel. Did you bother to watch the 5 hours of bullshit by both juntas yesterday? You can be a bear or bull without bringing politics into every frigging post. For someone with a historical moniker, you know little of history. They all suck the big one.

  21. bluestatedon commented on Apr 4

    “Three months in a row of payroll job losses and a sizable negative revision: these are clear signs that the job market is in recession,” said Jared Bernstein, an economist at the Economics Policy Institute. “I’m hard-pressed to imagine anyone who would raise doubt to that at this point.”

    NSF, as Barry pointed out above, job creation during this “recovery” is the worst in decades, so job losses will accordingly appear to be much more benign. When you couple the new data with the fact that official unemployment figures do not count those who’ve stopped looking, as well as those self-employed folks barely making enough to squeak by, the situation on Main Street, as it were, is hardly reassuring.

    That said, I have no doubt that Wall Street can rally in spite of this information. It’s got the Fed to backstop things.

  22. Dee Leverage commented on Apr 4

    While we are talking about sentiment, it is fascinating to see Kudlow being much more sanguine than in the recent past. He is prepearing to turn downright pessimistic in case the Dems take the White House. I can see right through this guy by now. His commentary is 100% about politics, zero percent economic reality.

  23. trackerman commented on Apr 4

    Did anyone notice that when the BLS reported the January negative payroll number, there were people on CNBC complaining (notably Erin Burnett) that the number was bad because the Birth-Death adjustment of -378K distorted the figure? Burnett moaned all day about this. This was the first and only time that I heard the Birth-Death adjuctment kicked around. Predictably, there has been no further discussion of this adjustment, as the Feb, March adjustments were 135K and 142K, resp. So in reality, the March -80k number was padded by 142K of “Thin Air” jobs. CNBC is definitely a “spin doctor” these days.

  24. dblwyo commented on Apr 4

    Farell’s point was/is pretty uninformed for an even simpler reason than BR’s – employment turns down after the economy turns down. So far the downturn in GDP is very mild. This is what you’d expect…and it’ll keep going. Between low job growth and NILF in theory there might be less room at the bottom but this is a very fragile economy. Next several months are more likely to satisfy the Farell test therefore.

  25. SPECTRE of Deflation commented on Apr 4

    Dee, ya Larry was not his Goldilocks self this AM. LOL! In fact, he’s a dollar bear for damn sure. When Kudlow goes bearish have we hit bottom? [We haven’t!, but it makes ya think LOL!]

  26. SPECTRE of Deflation commented on Apr 4

    Not so fast, what the Hell are you looking at? There is nothing stabilizing. We have major employment tankage which will get worse. It’s a given at this point. What we need to know is, “has the market discounted the shitty numbers now and on down the line”.

  27. david price commented on Apr 4

    I agree with Pat G. You cannot discount the politics in an election year. Any other year and we are below DOW 10 based on the current data IMO.

  28. DonKei commented on Apr 4


    You guys go to Bloomberg and see what the rich really think of themselves and us:

    Poor Larry Ellison dropped $200m on his mansion but claimed it was worth less than $166m when it came time for taxes. His victory, lowering his tax bill by about $3m per year, might prove pyrhhic.

    It’s not yours unless you can defend it, and Ellison just made the defense of his wealth problematic, at the least.

    Forget welfare queens, the rich are now firmly entrenched as the entitled class, free riding on all sorts of benefits that accrue to US citizenship, including a well-educated workforce and a powerful military to protect and promote their wealth accumulation.

  29. Dee Leverage commented on Apr 4


    Interesting question…but since Larry is so affected by politics, he can’t be used as a contrarian market indicator…maybe as a contrarian political indicator.

  30. IBH commented on Apr 4

    Vince has lost some edge over the past few years, since leaving KeyBanc (Victory Capital). He seems like the old Joey Bats, one sided in the face of opposing data. You are very correct in your analysis.

  31. SPECTRE of Deflation commented on Apr 4

    Dee, it was a joke. I wouldn’t bet a wooden nickel on it, but it is funny to see Larry so bearish all of a sudden. Maybe the greatest story never told needs a rewrite.

  32. Marcus Aurelius commented on Apr 4


    Sure I can, check my posts on this thread (especially the one regarding straw-men).

    How is my understanding of history flawed?

    OTOH, we are in this situation because of politics/policy.

    I seem to have touched a sore spot, but I won’t attribute your response to political affiliation (don’t want you trying to mug me again).

    BTW: I’ve always thought that your comments are the most enlightening of all posted here. Not a speck of drivel from you). My hat is off to you sir.

  33. Me and You commented on Apr 4


    I remember you used to say when the employment numbers were good that they were backward looking.

    Now, it appears you have flipped and do not call the employment numbers as backward looking anymore.

    Please explain…

  34. SPECTRE of Deflation commented on Apr 4

    MA, let’s play nice and just talk economics. There is more than enough blame to go around by both groups who are sucking J6P dry. Pointing fingers at one group or another is exactly what they want us to do. It makes it so much easier to do nothing while blaming it on someone else. I was overly harsh, and I apologize for my remarks. By the way, I’m not affiliated with anyone. I learned that they don’t care a long time ago.

  35. SPECTRE of Deflation commented on Apr 4

    MA, one thing I did forget. For me, the tell this week was when Ron Paul didn’t nail their asses to the wall on Constitutional grounds. He babbled for 5 full minutes. The FED busted their charter by a country mile, and not one of the CONgress assclowns called them on it. Very depressing for anyone who loves the Constitution. Rant over. Again, my apologies for my harsh remarks. It was certainly unclalled for, and I regret it.

  36. SPECTRE of Deflation commented on Apr 4

    Re/Max CEO coming up in minutes. I can’t wait for the spin from her. Who doesn’t need a good laugh on a Friday? Did you know there has never been a better time to buy? SHEESH!!!

  37. DL commented on Apr 4

    The “Farrell bottom” will prove to be temporary.

  38. Shane commented on Apr 4

    I admit, I was hoping Ron Paul would nail the Feds arse to the wall . . . .but he’s not a John Adams or a John Hancock, he’s more of a Thomas Jefferson type.

    If we want more people in congress to nail them to the wall . . . there are only two ways. Run for office and get voted in or vote someone in who is like that.

  39. SPECTRE of Deflation commented on Apr 4

    Shane, Bread and Circus come to mind for some reason. I must quote Lloyd Benson and say, “Mr. Paul, you are no Thomas Jefferson”. The Constitution is clear and unambiguous. There is nothing in the FED Charter allowing them to do what they have done. They have taken power that was not granted to them by CONgress. He’s as bought and paid for as the rest per what I saw in the Joint Committee meeting.

  40. wunsacon commented on Apr 4

    >> What we need to know is, “has the market discounted the shitty numbers now and on down the line”.
    >> Posted by: SPECTRE of Deflation


    Barry and others talked about the housing bubble from 2005 (or earlier than I was a reader). How did the market react? It went up. And, then, along come “Minsky moments” in various industries, moments that a minority of individual traders/investors anticipated quarters earlier.

    I suspect WS can’t see much beyond the *last* quarter…maybe a little into the present one.

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