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Goldman's NFP Take: "Much Weaker Than Headlines Suggest"
From Goldman's Jan Hatzius
USA: Non-Farm Payroll Employment - Much weaker than headlines suggest
Actual: -125,000 mom
Previous: 433,000 mom
Consensus: -130,000
Released: Friday, July 02, 2010 at 08:30 (New York time)
Much weaker than headlines suggest
BOTTOM LINE: The headlines of the June employment report were decent - a rise in private sector employment by 83,000 and a drop in the unemployment rate from 9.7% to 9.5% - but the "guts" were much weaker as household employment declined sharply and both the workweek and average hourly earnings declined. The report confirms that the labor market has not yet reached the self-sustaining recovery stage, at a time when forward-looking indicators of economic activity are slackening. We have judgmentally downgraded the US-MAP rating to -2 from the 0 suggested by the inline "headline" payrolls reading because of the much weaker guts of this report.
US-MAP:
Nonfarm Payrolls -10 (5, -2).
KEY NUMBERS:
Nonfarm payrolls -125k in June vs. GS -100k, median forecast -130k.
Private payrolls +83k in June vs. GS +150k, median forecast +110k.
Unemployment rate 9.5% in June vs. GS and median forecast 9.8%.
Average hourly earnings -0.1% in June (mom, +1.7% yoy) vs. GS and median forecast +0.1%.
MAIN POINTS:
1. Nonfarm payrolls fell 125,000, more than accounted for by a 225,000 drop in Census employment. Elsewhere, the private sector added 83,000 jobs and non-Census government employers 17,000. These numbers are fairly close to consensus expectations, especially once we take into account a cumulative net upward revision of 25,000 to total payrolls in May. There is some evidence that private sector hiring benefited from the unwind of a Census "displacement" effect in May, both in the pickup in overall private employment growth (83k vs. 33k in May) and in the sectoral distribution of gains, with a sharp rebound in leisure and hospitality employment (+37k after -7k in May). The establishment survey benefited from a birth-death adjustment of +147k, 14k more than in June 2009.
2. Other aspects of the establishment survey were considerably weaker. The payroll diffusion fell to 52.2 in the nonfarm business sector, from 54.8 in May and a recent high of 68.0 in April. The workweek dropped 0.1 hours to 34.1, with almost all of this drop due to a sharp 0.5-hour drop in manufacturing. Moreover, average hourly earnings fell 0.1%, on top of a downward revision to the prior month. Average hourly earnings now stand at just+ 1.7% year-on-year, a new cycle low. Hence, the implications for private-sector income generation as well as inflation are negative.
3. The household survey was very weak as well. The drop in the unemployment rate was entirely due to a huge 652k drop in the labor force, undoubtedly partly due to the dropout of Census workers from the labor force. Only some of these workers seem to have gone into the "pool of available workers" as broader measures of underemployment were mostly down as well. However, the Census cannot explain the fact that the employment/population ratio fell back to 58.5% in June from a peak of 58.8% in April (when the level of Census workers was lower than in June).
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TMosley said money was coming out of his trailer toilet there was so much around. He said it's littering the streets. I think TMosley is right and MSM is pulling a huge conspiracy over and us... money is raining from the sky.
I am awaiting on TMosley to give me the address to his house trailer so I can have some truck go over there and collect all the dollars coming out of his toilet. Everyone is going to be rich, just give me some time to get the trucks lined up.
TMosley has a magical toilet, Helicopter Ben played a fast one on us... he is not going to drop the money from the sky, he is going release through TMosley's toilet. TMosley is going to be rich.
More green shards.
Today every stop gets hit and the market closes flat.. dont bother trying to be clever.
Good perspective. I read this Goldman analysis as coaxing bears into a little trap today to distribute some more worthless shares.
Who gives a shit? The market has already jumped on the kick start again today. Led by, you guess it, banks and REITs. The Fed is simply going balls-to-the-walls now and blatantly doing whatever the fuck it wants to.
I'm honestly starting to give a fuck about this. It's so awful that it actually makes my want to vomit.
Yeah, it's frustrating, but your avatar is correct, if a little optimistic. This will not end well for the bulltards. Just be patient and use the time to get your house in order.
The problem is that the boat I'M on will sink. Christ, this has to stop but it won't. We are past the point of no return now.
Totally agree.
Metaphorically speaking, all our boats will sink. We will have lowered standards of living. We will actually need to rely on one another, but is your particular situation more dire? Just asking as a fellow ZH'er.
I live in Metro Detroit and work in the auto industry running an Engineering Department. That's the awful part.
Luckily, I moved here about 3 years ago and was wise enough to rent rather than get sucked into the "now is the time to buy" arguement (which people STILL pitch to me).
I'm liquid, have good cash reserves, and about $25k in the market and short equities.
So, amongst the masses I'm probably in better shape than most. I just wasn't considering growing my own crops to feed myself when I was going through graduate school.
That is bad. On a cheerful note, mechanical engineers are always in need. I work for a small start-up robotics company. We are nothing without our ME's. Also wise of you not to buy. I think your equity shorts will work out well, but be careful of possible counterparty risk. And then there's the risk of US default. Though I don't think it will happen, it's why I sometimes write, "Money isn't everything and soon it may be nothing at all."
Yeah, I think a lot about the changing social landscape. It's kind of our own "Great Expectations" revisited. I doubt you have to grow your own crops, though having a small garden would be beneficial for you and everyone else. I'm sure you can also befriend some farmers, if you haven't already. I live in a relatively rural area and I could grown crops, but I have many friends, neighbors and acquaintances who happily share their bounty with me. We won't be poorer or desperate if we band together.
At least your working.
Short the market, good. Have you considered buying Gold and Silver?
I've considered buy about $25k worth of silver eagles. But, shit, that could go down also. Gold, although great also, probably won't be a great currency-of-choice if need-be. It's easier to spend $25 silver coins than $1,200 gold ones, in my opinion.
I haven't done it yet, though. Probably should. Just haven't brought myself to do it, yet.
If you aren't married w/ kids (or even if you are), get your ass out of the USA and off to Asia.
My brother heads up a production unit (100+ employees) at a mid-range semiconductor manufacturer. He's got 4 kids, but is constantly considering proposals coming his way to re-locate overseas.
If you are younger, have valuable education/skills (as you do) & just getting started, get the fuck out of Dodge. This would be especially true for anyone entering health care.
I'm married (to a German national) and have one kid.
Call me stubborn, naive, overly-patriotic, or whatever. But, I'm not leaving my country. I'd rather riot with the masses and get a sense of satisfaction than give up. I hate these fuckers, no doubt about it. And, they might win, that's for sure. But, I'm going to knock out a few of their fucking teeth before they take me down.
Sorry, I was born a Yank, I'll fight for what's right (even in a futile effort), and I'll go down swinging. In other words, they'll have to pry the gun out of my dead cold hand before I'll give up.
I thought houses in DT were selling for a buck? How much lower are you going to wait for them to go before you get in? :)
They are actually going for free, if you agree to pay the taxes and bring them up to code. But, nobody lives in the city of Detroit. Everyone left MoTown during the 'white flight' to the northern suburbs after the riots of the late 60s. The ritzy suburbs (yes, they are actually nice) are actually quite salty. Check out Rochester, Birmingham, Bloomfield, Troy...easy $300k plus and dropping, of course, like a stone.
Now, if you feel like getting mugged and shot, take your $1 house in the "D".
Haa, the not in labor force category rose by 842,000 people MoM. Obviously these people don't need to eat, drink or need money. Argh! What a crappy report, DOW + 200 on this.
And let's not forget the 1 Million who are losing unemployment benefits. Sure, the Dow will probably be up today. But it's going back down as soon as the heady odors of BS waft away, and reality sets back in.
The drop in the CLF number seems to me to be a fudge number to keep the UERate from rising. The true situation on the street is an UERate somewhere north of 10%. Sooner or later the BLS will have to recognize this.....the B/D model are fictious also......just another number to confuse the masses.
From the WTF file.
http://www.youtube.com/watch?v=cAhmYKlsWW4
But you really weren't surprised were you? Just standard Dem talking points.
Christine Romer continued the theme this morning on CNBC, though she has a bit more sincere smile.
So the conspiracist take on this would be what, that Goldman turns bearish at the same time they're being grilled on Capitol Hill in order to show DC just who's boss, right?
(now is when the gold bitchez kid is supposed to chime in)
Gold, shmold, all I know is those 147k new jobs in birth-death model fantasyland will be coming right back out in the next annual revision
Obama: "Quick set the chopper down here, I got some very important things to talk about."
2 minutes later...
Obama: "You see by improving internet access in schools this will increase employment in the future.. "
What's the matter? Couldn't think of any better positive spin! Classic!!!
His spin was that everything is like so totally awesome on a y-o-y basis.
If I hear one more person suggest that everyone should work in I.T. I'm gonna go postal.
Just listened to Our President's Inspiring Words (c) David Axelrod, 2010, before he heads off to play golf with some celebrity. I take heart in knowing that out in the hinterlands, areas where many of those 800K who left the labor force in a single month will soon be losing their homes along with whatever remaining hope and self-respect they might have retained, capture The President's Concern (c) David Axelrod, 2010 to such an extent that he will soon be bringing them the wonders of Broadband Internet (c) Albert Gore, 1994 so that the unemployed and chronically hopeless can have access to the same range of pornography and on-line poker available to the rest of us. Stirring. Need to wipe my tears.
I would really like to know how they track, and can tell, 652k moved out of the labor force. It smells a lot more like throwing darts at the wall to me.
It's all in the algorithms (not to be confused with 'Al Gore'isms)..think big hulking number functions, kind of like that linear equation you learned in 9th grade algebra: y=mx+b. But these guys are big, so many variables that the even adding the Greek alphabet isn't enough. They got squiggly symbols from 19th century German doctoral theses and logarithms and sub and super-scripts so you can remember if "S" means scrap value or the amount of a sinking fund. It's science. And if you get more than 3 quarters worth of unfortunate output from the beast...well, call in your quants and ease up on your recursion to the mean term.
All I'm seeing is a pop and drop on the markets right now abeit we're only 20 minutes into the day so far.
As related to the article...
Why economists don't understand a simple thing, the concept of Entropy from physics is an awesome one. Lose a little bit here and there in terms of energy, the machine runs out eventually. We redouble efforts to artifically "push" the system usually turns into more energy cost (money being the energy).
The oil sands in Canada are suffering from that. It costs a barrel of oil to refine 1.01 barrels out of it. The sum gain is incredibly low and while the machines in the situation don't give a shit about the level of production, the people managing it see dimishing returns and their energy is taxed to make fractional gains on a now irreplacable power source. Does money make any difference in that situation, no it doesn't. It requires more energy. The dynamics if the energy is cheap or not is irrelevant, it simply needs more energy (oil) to continue.
The oil sands in Canada are suffering from that. It costs a barrel of oil to refine 1.01 barrels out of it.
Source, please.
William Marsden wrote about it in "Stupid to the last drop". It's not a bad book, but he runs through the net gain in terms of energy and the math/varibles used is good. He has a break down of the net cost in terms of energy per barrel. While the oils sands are a great hope, it's just managed to barely break even in terms of oil production. The hope is technology fills the hole with a better method of extraction because right now, it's expensive oil with alot of moving parts that require repair, people and energy to run.
Just to run the refinery they make their own electricity they use the refined oil produced to produce electricity because the cost of running infrastructure to the middle of nowhere would be insane. Canada is a big place with most of the people living on the border, the Sands are further than the infrastructure of a small town sitting next to it can provide.
Weird how people assume stuff just magically happens. Like the "gold" find in Afganistan, doesn't matter if there is a gazillion dollars of shiny rocks there, infrastructure is required to get it out of the ground and it takes energy to run that infrastructure. I won't even begin to explain the toxic nonsense that goes along with mining or oil exploration because it obvious humans don't care enough to make any associatations with it.
In all honesty why did he bother making that speach at all? Seems it was preplanned in case it was a -500k blowout..
U.S. May factory orders fall 1.4%; Ex-Transport down .06%
Yikes!!!
Workforce shrank by 652,000 and Not In Labor Force increased by a whopping 842,000!!! That is the reason the percentage dropped.
I can't imagine where these numbers came from, if the company I'm associated with and the businesses we deal with and the people I talk to have any bearing whatsoever on the bigger picture I think of as "reality".
We're no more going to hire anybody today than we're going to jump to the moon. Why should we? Sales are still decreasing, benefit costs and overhead are rising, cost of materials we have to buy is rising, order cancellations are increasing, credit card processings are bouncing, and the phone is hardly ringing.
In 2007 our gross sales were over $6 million, or > $500,000 per month, and we had 26 employees. UPS had to make two pickups a day.
Last month, we barely cleared $180,000 in gross receipts, and our margin has dropped by about 30% over the last three years and we're down to 19 people.
Green shoots my ass. I don't know who's hiring besides the government, the hospitals, and the soup kitchens.
Where the hell are my customers, Mr. Squid? Where are these green shoots you keep talking about, Mr. Helicopter Ben? And exactly how are you going to create jobs by extending the time that I have to pay people NOT to work, Ms. Pelosi? Who would you like me to lay off, so that I can pay taxes next year? I want some answers and I want them now.
I have had it with this whole bogus bag of crap we get fed on a daily basis until it's just not funny any more. And a market that goes up every time another disaster happens, and goes down when some government says they're going to try austerity? Gold that rises just because JPM stops shorting it, and falls when idiots liquidate it to buy UST? Or Euros? Or loans it to Spain???
Give me a BREAK. Lies and damn lies, all of it.
I'm done with all this. Done, I tell you. I'm going to go pull weeds or mow the yard, or have a beer or something.
</ rant off>
Thank you all for letting me vent. I feel better now.
Don't let the bastards grind you down.
What industry and region are you in? That business contraction is pretty severe.
Company in mid-south. Commercial (private small-plane) aviation-related avionics. (Another industry that Congress, the FAA and the EPA are trying their best to do in. Successfully, looks like.)
Good feedback.
The economy cannot come back unless jobs get created in the private sector. And I mean SECURE jobs that pay ENOUGH to give employees a perspective on their future. Without the ability to plan beyoned a weekly paycheque, the people aren't willing to invest into a house, a car, new appliances and so on. How could they? Credit is no longer the answer, the consumers have learned or are learning their lesson the hard way. The banks and other lenders are screwing the people any which way they can. They give you credit, they own you AND THEY OWN THE NATION.
The banks have overdone it. They were too greedy and they killed this economy and by extend, they are killing the nation.
Let us all remember this 4th of July weekend who is responsible for KILLING THE AMERICAN DREAM.
Fuck the banks.
I'd be afraid of catching something if I did that.
Yes! We have forgotten that July 4th is not a victory celebration - it was a Declaration of War.
I'm flying my Gadsden flag this year. "Don't Tread On Me"
Flying my Gadsden too!
Recognize it for what it is...BS, and move on.
"Gold that rises just because JPM stops shorting it, and falls when idiots liquidate it to buy UST? Or Euros? Or loans it to Spain???"
I've marveled at this also. The reverse of course is true as well, DOLLARS are priced in GOLD and it takes a helluva lot MORE dollars to buy one puny ounce does it not?
Got some chores to do for hurricane season.
SeeYa
"And exactly how are you going to create jobs by extending the time that I have to pay people NOT to work, Ms. Pelosi?"
Was that the MOST ASININE staement ever uttered by A Speaker of the House?.
Lord, what's she on?.Do THEY ACTUALLY believe 99% of americans are that gullible?.
These folks that have lost their jobs, and are losing unemployment bennies, are not just blue collar schmoes.........
Many are /were used to earning $50/$200k a year...........
By not paying them, they will be forced to do One of two things.......
Get a job at $7.75 an hour, or hit the streets, and storm D.C..........
The patientience quota is running really low and is nowhere's close to where it will be.
Soon, the LAST thing you will want to be, is a Politician........
What did Pelosi say?
http://www.breitbart.tv/pelosi-unemployment-checks-fastest-way-to-create-jobs/
C'mon Adam, don't hold back--tell us how you really feel!
There will be no solutions until we get these idiots out of control--or rather out of being out-of-control.
REUTERS: GLOBAL MARKETS-Stocks, oil rise on less-grim than expected jobs
* Global stocks hold steady on less fearsome jobs report
----------
Here we go. The new "better than exptected" is "less grim".
They cannot call the cattle black.
The numbers were terrible, 842,000 are no longer counted. How the market ignores simple math blows my mind.
The market doesn't ignore that.
The media has been hired to advertise stock buying.
The insiders are selling into any uptick.
There will be empty bag holders.
Yay! Double speak for the win!!
I guess there are about three people left trading now. Chart appears to have Parkinson's.
Yup...nothing worth trading in there today. It's a sloppy crapacular mess. No points of entry and holding bull/bear today would be akin to playing russian roulette with an automatic pistol.
Why not hold anything bear?
Do you honestly think there's a rabbit coming out of the hat over the weekend?
Like a pot at the end of the rainbow?
It's way too early for any further liquidity announcements ie QE2.
The market is a crap shoot like 2008. Anyone buying the dips here will get burned.
I wouldn't touch ANYTHING, seriously. You go jump in the pond right now you are goign to get bitten. All that needs to happen are the powers that be change their mind, print another 5 trillion and use their GS front men to sumo the markets around again.
Although I think we might be talking different strategies. I day trade only, I haven't held anything long in 10 years (I like keeping my money). Currently hold zero positions. My favs are the X3 ETF and I buy them in 10k block sizes. My favorite flavor is purple I like long walks on the beach I also find gum and peanuts don't mix.
If holding a long short sure fill your boots on the bear. Different strokes for different folks. I'll do what I usually do. Wait for the usual indicators before I move into bear or bull for an hour or two.
I don't have my Russian spy decoder ring handy... I can never figure out when I'm supposed to listen to Goldman or believe the opposite.
BTW, I'm extremely pissed that the market has not moved down. I want to cover some shorts. The manipulation is horseshit. I'm thinking it's all of these weekly's that they want to let expire so they are doing their damndest to hold it in a steady state.
If we believe in manipulation as most here do.. then we have to assume that they will not let the market slide into the long weekend.
The holiday has significance. But the charts and technicals are ugly and the slide will most definitely continue through the summer.
*******
US STOCKS SNAPSHOT-S&P 500 chart generates "death cross"
NEW YORK, July 2 (Reuters) - The S&P 500 <.SPX> weakened further from a technical perspective on Friday after its 50-day moving average broke below its 200-day moving average, indicating an accentuation of downside momentum.
This "death cross" --a shorter-term average falling below a longer-term average-- last occurred between the 50- and 200-day moving averages in December 2007, shortly after the beginning of the market decline that eventually took the S&P 500 to 12-year lows in March 2009.
Interesting. Thanks for the info. I will just use today to increase my longerterm short positions.
I definitely believe in the manipulation. It's extremely frustrating.
I'm new here, but I definitely enjoy the site and the comments. I've learned a ton. I do find it hard to resist tweaking the obsessives, however.
Same here. I'm in short positions since S&P couldn't hold 1090 level even with massive spin and manipulation. I missed the top in April but I figure better a bit late than never coming to the party. I don't intend to collect until October unless Uncle Ben opens the flood gates. Then there's only one thing to do. Close shorts asap and put 150% (includes my credit card limits) into cold hard gold bullion.
Yes, I missed the top as well. I'm 99% certain this puppy is going down. A Keynesian house o' cards.
I'm not an "active" investor, but I'm wondering what kind of impact the CBOE's weekly options are going to have on how the market moves.
Hey......Goldman's on board....
People need broadband so they can . . . what, buy shit online? Surf porn? Blog? How does that help create wealth? Seriously. I mean it's nice and all, and sure information availability is a good thing, but online businesses are either services or knowledge based, or retail - no manufacturing.
we need to be building useful stuff.
No Ned, we need the Internet to look for jobs. Because they don't list them in the newspapers anymore. /sarcasm off
They will push this thing green today, probably over 100 points just to make all the sheep happy and ok with spending just a little more than they think they should on holiday fun, then tuesday they will lower the hammer again.
Google was not suprised by the report. Google knows all. Bow down before the knowledge of Google.
http://merrillovermatter.blogspot.com/2010/07/is-google-trends-providing-sneak-peak.html
Google Trends is showing a worsening jobs picture. In real time.
Here is another Google Trend. The iPhone keyword searches correlate exactly with mentions in the media.
http://google.com/trends?q=iPhone
Congressional hard balling on the unemployment extension bill should drive more people into the workforce, albiet at lower paying jobs. but its a win win for them, the unemployment rate goes down, and payroll tax revenue goes up. the GOP was dumb to oppose the extension, the real issue might be what happens the next time the Sec of T has to lobby them to raise the debt ceiling.
that could be a market and economy changing event, when is that going to happen i wonder?
There has developed two strong opposing views on the immigration debate that relates to jobs. One view, expressed by Obama yesterday in a surprising analysis of U.S. citizenship, is that being “an American is not a matter of blood or birth. It's a matter of faith. ...” The other, if you need the strong details, can be found in Karl Denninger’s shot across the bow today:
“We need to figure out how to live in a nation with a forty percent smaller GDP than we now have. Yes, 40%. That means you, I, everyone else. The 'living large' game is over. All Ponzi Schemes ultimately collapse - they do not go quietly into the night. The collapse is brutal, it's quick, it's efficient and it's devastating to anyone caught in it.
“Every time. …
“There are some things we can do to help though, and they don't cost much money at all.
“One of them is to kick out the 20 million+ illegal invaders who are consuming resources of all sorts - including taking jobs that Americans could be doing. The non-institutional working-age population (of legal residents and citizens) has gone from 230.6 million in 2007 to 237.5 million now. The number employed has gone from 144.2
“So tell me why we have 20 million illegal invaders in our nation again? Sure, some of them have jobs. But every one of those jobs is one that an American could be doing. It is an outrage that we allow our nation to be overrun with illegal Mexican invaders while our citizens are out of work and days or weeks away from being evicted and living under a highway overpass. ...
"There's your employment problem.
“Who was it that gave a speech yesterday exhorting us to 'understand' all those illegal invaders in our country, let them keep the jobs that Americans could be doing, and not kick them out again?
“That would be President Obama, I think.....
“Hmmm...”
http://market-ticker.denninger.net/
Harumph!
Obama has lost the vote of Karl Denninger? It's the end of the world as we know it ;-)
"It takes a strong man to stand up to the banking interests that bribe everyone up and down Washington DC, and until I see that strength I will not commit to being pleased with my vote for President Obama, which I did cast with full knowledge that while a President Obama is only 10% likely to do the right thing, a President McCain was 0% likely to do so."
And apparently he thought that man was from the morally superior and ethical to a fault city of Chicago?...ROTFL.
Certainly a lot of details like that to take into consideration. Thanks windows vps | cheap vps | cheap hosting | forex vps