Yeah, its that time once again: NFP day.
I am of the mind that forecasting this number is an exercise in futility. The "official" release does not seem to square with other data — withholding tax, sentiment, earnings, and even anecdotal — suggesting that employment is flaccid, and moving in the wrong direction.
Even the consensus this month is tough to track: 40k (Marketwatch), 50k (Barron’s), 55k (WSJ).
Regardless of the folly of forecasting, I expect this month’s NFP will be the first six figure job loss of this cycle. BLS has not released a drop of that magnitude since March 2003 — just before the new Birth/Death model was implemented 5 years ago. Coincidence? I think not.
The trend of new job creation is down, while unemployment is up. Hence, I am definitely taking the Under this month. I suspect the consensus to be off by a magnitude of 2X or even 3X.
Consider the recent data:
• ADP private dropped 79,000 in June. ADP has consistently overstated payroll growth since their Jobs Surge forecast in December. Average overstatement = 93,000 per month (do the math yourselves)
• ISM employment fell from 45.5 in May to 43.7 in June, the lowest since May/03.
• Weekly claims for
unemployment benefits continue to rise; Continuing claims last week were at their highest levels since Feb ’04.• Conference Board survey question ‘jobs are hard to get’ versus ‘jobs are plentiful’ is at its worst level in 5 years (December 2003).
• Challenger layoffs were 81,755 June, up 46.7% year-over-year in June.
• Major layoff announcements were up to 275,292 in Q2 — a 39.4% year-over-year gain to a 3 three year high;
• Hiring plans are down 63.7% from a year ago and 36% month-over-month.
• Monster employment survey slipped again this month (Disclosure: We are short MNST)
Hence, we have the potential for a startling drop in NFP this month. Especially with this report, your mileage may vary . . .
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Chart courtesy of Gary Shilling
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Sources:
High Unemployment Ahead
Gary Shilling
Economic Research and Investment Strategy
July 2008, Volume XXIV, Number 7
Recession reality has not receded
David A. Rosenberg
Merrill Lynch, 02 July 2008
http://tinyurl.com/6yzymz
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It would seem like the trend over the next year would be bigger job losses and higher unemployment numbers as we deal with a bear market and a recession.
On what table is the B/D Adjustment listed
BR: with 114,000 new job losses reported today (June + revisions), your forecast for a six-figure loss is essentially correct. Mind you, you may be further exalted next month!