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Goldman Post-Mortem On Unemployment And Non-Farm Payrolls
Jan Hatzius' mea culpa, after the BLS decided to kick the the NFP consensus squarely in the shins, is lacking. Most notable the discussion about lagging wage increases: you can't have inflation when people are making less then (or the same as) they used to make in nominal terms. Where is the marginal difference coming from: why the JPMorgan Chase Gold-plated Tungsten credit card of course.
Much Less Soggy than Expected
BOTTOM LINE: A much better employment report than anticipated, with only a small drop in payrolls and large upward revisions to prior months. Workweeks also lengthen, pushing indexes of hours worked up and probably signalling smaller (though still substantial) productivity gains. Unemployment decline reflects an increase in the household measure of employment (which had been substantially weaker than the payrolls); with the labor force having shunk over the past year, renewed increases in unemployment remain quite likely.
KEY NUMBERS:
Nonfarm payrollls -11,000 in Nov vs GS -100,000, median forecast -125,000.
Unemployment rate 10.0% in Nov vs GS 10.1%, median forecast 10.2%.
Average hourly earnings +0.1% in Nov (mom, +2.2% yoy) vs GS +0.1%, median forecast +0.2%.
MAIN POINTS:
1. Payroll losses much smaller than expected with large upward revisions to prior months (about 80,000 each to net changes in Sep and Oct). This does not appear due to quirks in seasonal adjustment. Some had thought that the exceptional weakness in Nov 2008 would bias this year's Nov seasonal towards adding more to the raw payroll change; in the event, it went the other way (seasonals subtracted 91,000 this year; added 13,000 last year). The birth/death adjustment to capture the net effects of startups and firms going out of business, neither of which can be surveyed, could be a more important issue; it added 30,000 to the (unadjusted) payroll count in Nov. Even so, the report is clearly better than expected. The survey of households, which had been weaker, also improved, showing a 227,000 increase in employment (though -109,000 when adjusted to match the way in which nonfarm payrolls are tallied).
2. Predictably, the improvement was in sectors that tend to be cyclical. Thus, the loss in manufacturing jobs narrowed to 41,000 in Nov and shows smaller losses on revisoin; construction job losses were 27,000 in Nov, much smaller than the 55,000-70,000 pace of recent months. The temporary help category rose 52,000 in Nov and was revised up about 10,000 in each of the past two months. Government payrolls rose, but only by 7,000, so they were not a distorting factor in either direction. Reflecting the improved performance of total payrolls, the diffusion indexes -- the percentages of industries showing job gains -- rose to 40.6% for total nonfarm payrolls and 30.7% for manufacturing from 32.5% and 18.7%, respectively, in October.
3. Work schedules also lengthened in Nov, by 0.2 hour for the overall economy and 0.3 hour in the manufacturing sector. Overtime hours in manufacturing, another cyclically sensitive indicator, also rose by 0.1 hour. As a result, the index of total hours worked was up 0.6% on the month, reducing the downward trend into Q4 to -1.1% at an annual rate. With the bean count for fourth-quarter GDP fairly consistent with our +3% forecast for annualized growth, this surprise in hours probably reflects reducd (but still substantial) productivity gains.
4. The improvement in the household measure of employment pulled the jobless rate down to 10% (9.992% before revision) as the labor force shrunk further (by 98,000); the "U6" measure of underemployment that adds marginally attached workers and those working part time for economic reasons into the mix also declined, to 17.2% from 17.5%. The weakness in the labor force does create a presumption of further increases in unemployment -- or alternatively a high bar for the rate of job growth that is consistent with bringing it down further -- as some of this is bound to be reversed as the recovery proceeds. Over the past year, the labor force has fallen by nearly 1/2%; it normally rises about 1% per year.
5. Reflecting the high level of unemployment, wages rose only 0.1%, pulling the year-to-year trend down to 2.2%. We expect weakness in wages to continue for quite a while as the unemployment rate remains far above the level consistent with full employment (probably about 5%).
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Unexpectedly less soggy.
ECRI has been very accurate in their predictions
http://www.businesscycle.com/news/press
I guess the employment number is important if you have any faith in government. Me, I remember the wonderful job that "Brownie" and FEMA did in the wake of Katrina.
in another thread somone referenced the Carry Trade - Gold tanking - CDN indexes tanking - US indexes about to go red -
I think that the most disturbing thing about this report was the huge upwards revision to the September report. How can they justify being that far off two months out, and I believe the September number was revised downwards in the October report.
Hmmm.
From the WSJ Blogs:
Economists React: ‘Game-Changer’ Report on Jobs
Temp Employment: Lousy Jobs, Good Signal
LOL How many points do you get with that card?
Corelation reestablished. Market tanking with the Euro tanking big time. any posibilities for a graph showing the time lag?where did it all start?And whether anybody buyig stocks anymore,or they just pop up futures at the beginning to sell to market orders at open(not very familiar with those intricacies)?I mean that is the third day in a row with such up opening and a decline afterward,so may be it is costing the big boys much less to prop up futures and then dump the holding at profit. Or may be the drop in the 10y prices caused a panic for tg?. Either way,this micromanagement of the economy through the stock market is not healthy IMHO....
I wonder if they know there will be a monster revision for the January report and this report (along with the Sept and Oct revisions) was to build a cushion for that.
ALso, does anyone know what's the deal with the reported ~850k birth/death over correction that they have stated will have to be taken out in February? Seems like that's enough to move the dial up at least one whole percentage point.
The Household and establishment surveys are separate animals. The 800k downward revisions coming the 1st Fri in Feb won't impact the U3 headline #s
"This number was just phenomenal," said Phil Orlando, chief equity market strategist at Federated Investors in New York, referring to the job loss figure. "That sound you heard was bears fainting all across America and hitting their head on the pavement."
Wonder if he would have said this if he knew markets would be in the red after their morning surge.
There's a lot of statistical fudging going on, but as usual what counts for the market sheep is the headline.
As with the Aerosmith song: Dream On
Nonfarm private employment decreased 169,000 from October to November 2009 on a seasonally adjusted basis, according to the ADP National Employment Report
ADP Report PDF http://www.adpemploymentreport.com/pdf/FINAL_Report_November_09.pdf
Website: http://www.adpemploymentreport.com/
Funny 11000 jobs show that no one in these markets has a clue. Unbelievable movements today .Computer driven momentum plays? The worlds biggest commodity - oil $2 up then $2.50 down then$1 up. Fx/gold ditto.Only play to hold positions sooner or later you can get out at cost.
Its Friday. Does anyone else just not care today like me?
Looks like I'm breaking into this bottle of Jack before noon today (pst)
reminded of scene from AIRPLANE ... hell of a day to give up smoking/JackD/glue sniffing...
im still excited by the thought that a net loss of 11000 jobs resulted in a severe drop(!) in total unemployment
Previous month's job loss estimates were revised downward accounting for the change.
It's the tactic of wearing people down. People who expect drastic declines hate slow motion drops where everything takes forever. We all want it now and so slowly but surely they have done their best to slow things way down...the proverbial "soft landing" situation that we all hate.
Doesn't make any sense...why doesn't the BLS just start making things up, I'm so tired for reading their reports, especially last year when birth/death was such a ridiculous number. It's the same old same old all over again.
I give no credence to these numbers at all, they've sliced up the pie of unemployed people into palatable chunks the sum of which might reveal the totality of the situation.
Read this, different story from ECRI:
http://www.npr.org/templates/story/story.php?storyId=121087285