Dissecting the NonFarm Payroll Data

Today’s NFP data was surprising — both to the upside and the downside. 20,000 jobs were lost in January, below the consensus. But everywhere else, there were surprising improvements.

Is it possible that those people expecting a mediocre recovery and weak employment picture — including me — might be pleasantly surprised? A closer look suggests that many people may be underestimating the recovery.

Consider the cyclical progress that occurs as a recovery takes hold: Revenues improve, followed eventually by greater Profits. Companies have been doing capital expenditure spending first . . . and only hiring when they have to. Greater hiring leads to greater spending.

So far, we have seen the revenue improvements, and the beginnings of better profits. Various tech firms (Cisco in particular) are seeing improving CapEx orders. Temp Help has improved, and some firms are actually hiring.

Ask yourself what outcome would surprise the most people — the economy sliding in a double dip recession — or a stronger than anticipated recovery?

Here are some other data points beneath the headlines:

Positives

1. BLS reported that in January, persons unemployed “due to job loss” decreased by 378,000 to 9.3 million. That is a decent number.  And, “nearly all of this decline” came from the “permanent job losers.” (See table A-11.)

2. The Underemployed — Persons who want full time jobs but working part time instead — fell from 9.2 to 8.3 million in January. That is an enormous improvement. (See table A-8.)

3. Temporary help services added 52,000 jobs — that is a leading indicator of future hiring. (See table B-1.) Since the temp help lows in September 2009, temporary help services employment has risen by 247,000.

4. The Household survey showed growth of 541,000 workers. In a recovery, this tends to pick up new employees (especially at smaller firms) faster than other measures. The Household Survey isn’t “large firm ” biased the way the Establishment Survey is.

5. After experiencing steep job losses earlier in the recession, job losses in manufacturing has moderated considerably.

6. Retail trade employment rose by 42,000 in January, after showing little
change in the prior 2 months.

Negatives

1. 2009 benchmark revision reveal employment in 2009 was far worse than originally believed — revised data showed nearly 600,000 more jobs lost than previously reported.

2. The number of long-term unemployed — jobless for 27 weeks or longer — is still rising. Since the December 2007 start of the recession, long-term unemployed has risen by 5.0 million. (See table A-12.)

3. NiLFS — Not in Labor Force — rose 409,000 to ~2.5 million persons. They are also called “marginally attached to the labor force” — not in the labor force, want and available for work, and had looked for a job sometime in the prior 12 months.  (See table A-16.)

4. The average workweek for all employees on private nonfarm payrolls are still near record lows — 33.9 hours in January.5.  1.1 million discouraged workers in January is a huge increase of 734,000 from a year earlier. (Discouraged workers are not currently looking for work because they believe no jobs are available for them)

6. Revisions continue to be negative. December 2009 was revised downwards to 150k loss from 85k.