Archive - Apr 6, 2012

March NFP big miss at just 120K. Unemployment rate declines from 8.3% to 8.2%. Futures slide, for at least a few minutes before the NEW QE TM rumor starts spreading. The household survey actually posted a decline in March from 142,065 to 142,034. Considering Birth Death added 90K to the NSA number, the actual number was almost unchanged. The unemployment rate drops to 8.2% for one simple reason: the number of people not in the labor force is back to all time highs: 87,897,000. And as always, as we predicted when Goldman hiked its NFP forecast yesterday from 175K to 200K saying "if Goldman's recent predictive track record is any indication, tomorrow's NFP will be a disaster", Goldie once again skewers everyone. Finally, Joe LaVorgna's +250,000 forecast was just 100% off... as usual.

While still gripped in the bearhug of the warmest winter/spring period seemingly in history, and with virtually everyone now having woken up to the realization (two months delayed) that winter seasonal adjustments when April falls in February may not be the most appropriate way to adjust Non-seasonally adjusted data, we would like to demonstrate the seasonal adjustment factor by month over the past decade. The first chart below shows the annual difference between the NSA and SA number from 2002 to 2012. The second one: just the average. The bottom line is that in the January-March period, there are, on average, 4,413,000 jobs "added" purely due to seasonal adjustments. And while these seasonal adjustments may be appropriate when winter is indeed winter, they are far more difficult to justify when summer falls in the middle of winter. Furthermore, it also means that if indeed we get the +200,000 NFP number that many expect today, this would mean 2012 YTD has added a total of 711,000 jobs. Putting this number in perspective, this is 16.1% of just the seasonal addition over the same period. In other words: jobs added solely in the confines of some opaque excel spreadsheet based on historical patterns, pre 75 degrees in February. Finally, the March BLS number of +200,000, if indeed it comes there, will be 24% of just the shotgun average March seasonal adjustment which has averaged to 824,600 jobs over the past decade. Yet things finally change in April, when seasonal adjustments hardly have an impact on the NSA number, and then in May things get from bad to worse, when the Seasonal Adjustment will for the first time every year, subtract 670,100 jobs from the NSA number. Appropriately enough, this will come just before the June FOMC meeting. Finally, should the NFP number be a major beat, it merely makes US-based QE that much more unlikely until and unless we get a major disappointment in payrolls.

• More on JPM's uber-prop trader Bruno Iskil - 'London Whale' Rattles Debt Market (WSJ):
• Traders Eye 45-Minute Window After Good Friday Report (Bloomberg)
• Sky News admits hacking of emails (FT)
• Britain’s Economy Barely Grew in First Quarter, Niesr Estimates (Bloomberg)
• Olbermann sues Current TV for $50M, cites glitches (USAToday), full lawsuit here
• Morgan Stanley broadens clawback rules (FT)
• Swiss Franc Showdown Looms as Jordan Defends SNB Ceiling (Bloomberg)
• Key Democratic donors cool to pro-Obama Super PAC (Reuters)
• Investors' Prying Eyes Blinded by New Law (WSJ)
• U.S. not backing off as Iran sanctions bite (Reuters)

Yesterday, out of left field, Goldman hiked its March NFP forecast from +175,000 to match consensus at +200,000. This is rather odd, considering Goldman's recent bearish spin on economic data. As it turns out the justification for this is not only to align with the trendline in ADP and claims data, but because now, suddenly, Goldman thinks that the 100,000 jobs boost due to warm weather, will not be unwound until April. In retrospect this makes sense: Goldman also recently gave up on the Fed announcing the NEW QE in April, as a result the next such opportunity will be June, which in turn means that a rapid deterioration in the economy will have to take place just before the FOMC meeting, rather than a gentle slowing down. Which is why today's NFP has now become a crapshoot, especially since it is still all in the seasonal adjustments. One thing is certain: the quality of jobs, as first demonstrated here, will continue to go down: because in an election year, one dilutes everything, up to and including jobs.

America Slides Into Fascism