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Jobs: It's Not Just Census Hiring!
Rick
MacDonal, director of investment research and analysis for Action Economics,
writes in Bloomberg Businessweek, Jobs:
Will a May Surge Be Followed by a June Slump?:
Action
Economics expects U.S. nonfarm payrolls to surge by 480,000 in the
government's May employment report, scheduled for release on June 4,
with a hefty boost of 420,000 from Census hiring and a 400,000 rise for
government payrolls, alongside an 80,000 rise in private payrolls—the
fifth straight monthly increase—that
would come in below the surprisingly large 231,000 increase in April
and the 174,000 gain in March.
We also expect the jobless
rate to moderate to 9.8 percent from the surprising pop to 9.9 percent
in April, while the average workweek holds at 34.1 hours and average
hourly earnings post a 0.1 percent gain.
The industry mix should
reveal the 400,000 surge in government hiring mentioned earlier,
alongside a 10,000 rise in goods-producing employment that includes a
20,000 gain in factory employment, and a 70,000 gain in service-sector
jobs excluding government. Though construction employment has risen in
each of the previous two months, the gains may reflect the boost in
April housing-sector activity spurred by the Apr. 30 expiration of the
home buyers' tax credit, and could prove temporary.Census Hiring Outlook
For 2010 Census hirings
overall, we assume that the contribution to government employment will
climb to a cumulative peak of 574,000 by May, which would be just above
the 530,000 seen in May 2000 and well above the 335,000 seen in May
1990. The climb to a May peak should be quickly reversed by yearend,
and generally hiring levels fall by nearly half in June and a little
more than half by July. Given an assumed 250,000 drop in Census hirings
in June, the next payroll figure after the May report should reverse
into negative territory; our estimate calls for a 100,000 decline in
payrolls in June, which will toss some cold water on enthusiasm
associated with the May increase.
Here
is a look at some of the other data that Action Economics has factored
into its forecast:
The ADP survey of private-sector employment
scheduled for release on June 3 is expected to reveal a 40,000 May
gain, following a 32,000 April increase that is poised for upward
revision toward the 231,000 private-payroll gain in the government's
April jobs report. The 19,000 March figure should also be revised
toward the 174,000 March private-payroll gain. The ADP industry
breakdown should reveal a flat May figure for jobs among goods producers
with a 20,000 factory job gain, while the service employment increase
should largely match the headline gain.
The weekly initial
jobless claims figures for May provide the greatest source of downside
risk for payrolls. Initial claims have averaged a surprisingly lofty
459,000 thus far in May, vs. readings of 460,000 in April and 450,000 in
March, and prior averages of 468,000 in February and 478,000 in
January. Overall, the downtrend in initial claims has flattened out
since early February, alongside a flattening downtrend in continuing
claims as well, and the levels of these measures suggest that
private-payroll growth is stalling around the zero area despite payroll
gains over the last few months.Other Indicators Weak
Other
labor-market indicators have been weak in May. The employment
components of the available factory sentiment reports have shown a
pattern of mostly declines for May, which is consistent with our
assumption that private-payroll growth may have been overstated in the
last two monthly payroll reports. In contrast, most consumer-confidence
measures edged up on the month, but at levels that remain deep in
recession territory.
Overall, the May
payroll report should benefit from a hefty Census boost, though beyond
this distortion the labor market continues to mend only slowly, and we
assume that a lean May private-payroll gain will reverse some of the
enthusiasm following the surprisingly large private-payroll gains in
March and April. We have yet to see the degree to which the resumption
of positive gross domestic product growth will start to accelerate to
the higher growth rates usually seen in the early years of expansions.
The fuel for the current boost to the U.S. economy—lean manufacturer
inventories—may run dry before GDP growth has accelerated to rates that
will allow a sustainable jobless rate downtrend.
The May jobs
report will be given a positive spin in the media given the big surge
in Census hirings, but payrolls are poised for a Census-led decline in
June that could top 100,000 if we don't see a sustained climb in the
pace of private-sector job creation.
I
respectfully disagree with Mr. MacDonald's assesment of the US jobs
market. Please consider the following factors which argue in favor of
massive payrolls (way over 500,000) this Friday:
1) ISM Report: "The manufacturing
sector grew for the 10th consecutive month during May. The
rate of growth as indicated by the PMI is driven by continued strength
in new orders and production. Employment continues to grow as
manufacturers have added to payrolls for six consecutive months. The
recovery continues to broaden as 16 of 18 industries report
growth. There are a number of reports, particularly in the
tech sector, of shortages of components; this is the result of
excessive inventory de-stocking during the downturn."
2) Payrolls
May Underestimate U.S. Jobs as Household Survey Surges:In the
first four months of the year, the adjusted household data shows
employment grew by 1.67 million, almost three times the 573,000
increase in payrolls. At turning points in the economy, the
former may prove more accurate because it’s more likely to pick up
hiring at small companies and new firms that may be under the
government’s radar.
“The household survey
is actually more reliable than the payroll survey as long as you have
several months to confirm the trend,” said Christopher Low, chief
economist at FTN Financial in New York. “And we do.”
The jump in household employment may explain why
consumer spending in the first quarter rose by the most in three
years. It may also be one reason why federal tax collections
are climbing as much as they are, Morgan Stanley economists David
Greenlaw and Ted Wieseman said in a note to clients today. The Treasury
has pulled in $303.3 billion in income tax receipts from the start of
the fiscal year in October through May 5, up from $280.1 billion in
the same time last year.
3) Real
exports & real imports are surging:Real exports of goods and
services increased 7.2 percent in the first quarter, compared with an
increase of 22.8 percent in the fourth. Real imports of goods and
services increased 10.4 percent, compared with an increase of 15.8
percent.
4) Profits
surged in Q1 2010: Profits before tax increased $180.9 billion in
the first quarter, compared with an increase of $137.0 billion in the
fourth quarter.
But the key for Friday is point
#2. Importantly, at turning points, household survey leads the payrolls
survey. Stefane Marion, Chief Economist at the National Bank of Canada
made this point the last jobs report in a NBF Hot Chart, US
payrolls playing catch-up to household jobs (see chart above):
Labour
markets surprised on the upside in April with the creation of 290,000
payroll jobs, the best showing in almost four years. Impressively, the
private sector accounted for most of the improvement with a 231,000
addition to headcounts. We also note that job creation in the previous
two months was revised up by a cumulative 121,000. Upward revisions are
becoming larger, a situation that is likely to persist. We have argued
many times before that at the start of an economic recovery, the
establishment survey tends to understate job creation. This is what is
happening again. As today’s Hot Chart shows, the Household survey (from
which the unemployment rate is derived) is depicting a much bigger
improvement in job creation that suggested by the payroll survey.According
to this methodology, which by the way is used in Canada to derive
employment gains, shows the creation of close to two million jobs since
the start of the year (+550,000 in April alone). We expect payroll
jobs to continue to play catch-up to the household survey in the coming
months with more upward revisions (provided that credit markets do not
deteriorate).
Fundamentals
have been improving for quite some time. I expect significant gains in
full-time jobs in the private sector and a strong pickup in
manufacturing jobs, many of which will come from the auto sector
benefiting from the pickup
in car sales.
Bottom-line: You can read all the bears in the world,
focus on events in Europe (which are bullish long-term, but nobody
bothers to mention this), focus on the BP disaster, focus on every piece
of negative data in the world, but the reality is that the US economic
recovery is picking up steam. Expect a monster jobs report this Friday,
and it's not just a one-off from Census hiring!
»
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Another nice call by Leo.
Leo,
Thanks for the post. I disagree with your conclusions but appreciate your willingness to share your prespective.
Government spending just isn't sustainable. It cannot, in the long run, bring us back to a sustainable properity. IMHO the numbers that will be released have been massaged to produce the greatest possible benefit for Barry and Co. and they really need it.
Keep publishing though ... I just hope that in the end such overly optomistic outlooks don't act as ... whitenoise ... covering up what someone doesn't want us to hear.
No use fighting with gloom & doomers here. Some of you are seriously disturbed. We shall wait and see what the jobs report says.
Leo, you're an optimist with a good heart. The venom directed at you is uncalled for, even if they disagree. I don't get it. If they can't stand to hear your opinion, why the heck do they keep coming back? Family bickering maybe :)
Perhaps because we don't see it in Canada, we can be more optimistic (I'm not in the longterm). I can barely detect the recession in my useless little circle of experience. Lots of work in construction. We want to hire for summer help but can't find anyone. My family and friends are all comfortably employed. When I hear of the pain on here, I can't help but feel we are in a bubble.
I got some laborers and roofers I'll send your way if you don't mind hiring illegal immigrants from the states.
Leo,
You are definitely not short on enthusiasm, that's for sure. Listen, I hope you are right. I just don't buy a sustainable recovery at this point for the mere fact that not much has changed on the banks and consumer balance sheet since this whole thing started over 2 years ago. I just don't see any concrete evidence that the millions of debt laden balance sheets have been adjusted for the reality of the day. Both corporate and personal balance sheets contain phony data and it's not going away on its own or due to time.
Now I do acknowledge that many of those corporations and individuals who were financially sound from the beginning of this debacle are feeling a bit less stress. This, in my opinion, is the only reason we are seeing some better spending numbers, not because businesses are rushing out to hire people. So much of this spending is a result of demand and manufacturing falling to zero (on a dime) due to the fact that people were scared shitless. Henceforth, the inventory rebuild phenomenon and government spending. This phenomenon is not self sustainable.
State and local shortfalls have been kept VERY quiet, except in the States that are severly damaged. We are just now getting to the point where you will start seeing local municipalities start firing people to balance their bugets. Newspaper articles are just now starting to pop up here in Dallas, Texas and I would assume the same is thing is occuring throughout the United States.
Leo, bottom line most American citizens are still broke and many are getting more broke by the day. Also uncle Ben has orchestrated the largest syncranized government spending spree ever and the world is waking up to the fact that you can't solve a debt problem by piling on more debt.
Leo, you shit disturber. This is a website for bears who consider the Apocalpse the best case scenario.
While I am nowhere near as bullish as you, I will point out my readings of the EIA inventory numbers today and for the past few weeks indicate consumption of crude oil and its products has been picking up dramatically. Definitely a sign the American economy is gathering steam and that Americans have not quite kicked their automobile habit yet.
Mind you, even with huge inventories, this means oil prices will start to climb, which takes us into Jeff Rubin territory. Any recovery will cause oil prices to rise, which will lead to another recession. (Which will be good for solar stocks. Are there any good ones?)
PS. Notice the CPP is not supporting Stronach's move to convert his Magna shares.
My family is about to wave the white flag and get ourselves public sector jobs because the way things are going, the three of us will soon have to carry a million public sector fee-riders on our backs alone.
Everyone will end up working for the government - instead of unemployment benefits soon they'll be added as "employees" and the numbers will look spectacular. 30-million new government hires and we'd have zero percent unemployment - the market would shoot to that 30,000 number.
Is that you, Barry?
Or Ben...Tim...anybody???
This article reads like a CNBC transcript... Obviously, borrowing a shit-ton of money at 0% and then throwing it down the rat hole of door-to-door counting jobs can cause the data to dislocate from the reality. Complete waste of my time...
Leo is like Candide... a gang could rape his wife and he would find a positive intrepretation. The oil spill is creating new jobs, too. Long live Dr. Pangloss!!
Leo and other readers, I would suggest you order and read Shadow Government Statistics (www.shadowstats.com) to get a true and correct perspective on US unemployment, CPI, GDP, etc.. In his publication John Wiliams painstakingly takes the BLS data set and normalizes it to historical (i.e. pre-Clinton) standards so one can truly do an apples-to-apples analysis.
I know Leo has been predicting since December of last year we would see "monster" job reports in the coming months. From my perspective, this might "qualify" as a monster report but we all know the statistics are being massaged after statistics providers listen to an phone message of F-bombs from Rahm.
Can we substitute 'abomination' for 'monster' in this context?
Hey, look on the bright side... imagine all those happy faces tomorrow... time to pop the champagne (again) Dennis!
Leo, some of us get out in the world, some of us work for a living, not every one of us is a lying, prevaricating parasite like you and others like you, Summers, Geithner, Blankfein, the scumbag bucketshop runner in the bowels of some boilerroom. If you get out in the world, you see the effects of falling employment that belies the lies in the BLS and everything, every goddamn thing you say is a lie, including 'and' and 'the'. You sicken and disgust me, because even if you're right, your position further entrenches what is wrong with America and, by extension, the world. Your heart is black with moral rot, consumed by your casino obsession and the lies you spew to keep the games going and the new day at bay. You are the extreme problem and not one tiny part of any proper solution, and your victory is the defeat of any notion of justice. I know, you don't care, you're in it for the fun and the money, and that's because as a full-blown narcissist, you have no center. Leo, let me put it this way: you, and others like you, are the lowest form of life on Earth and I hope you burn in some Hell for all eternity. Have a nice day.
Leo, this is NUMBER-CRUNCHING. These surveys are already an incredibly small, inaccurate and skewed sample from only larger formal employers. At the street level, things will only get worse. Sure, spending has increased, but so has debt. Sure, export-related employment has increased, but who's doing the buying of goods necessary for this?
Point is, there is little organic growth. Little private sector growth.
To cheer this jobs report as an "improvement" is to celebrate government spending. To cheer increased tax collections is to "hooray!" Keynesianism.
Let's wait until the governments are out of the picture.
How'd you like that ADP number idiot.
Learn what the birth death adjustment and "left the workforce" mean.
Then you'll figure out why the unemployment rate jumped to 9.9% and will probably jump again.
So Leo, everytime is different - but somehow, data on dozens of financial crises over 800 hundred years shows amazing similarities? Can't follow your logic.
I expect a great report with a pretty U3 number that sees drastic improvement to hand out to the media. I also expect the report to be filled with outright falsehoods.
I do not trust government statistics. They are phony.
You want to know how the economy is doing? These are reports that can be trusted.
http://www.aar.org/NewsAndEvents/WeeklyTrafficReport.aspx
In the latest reporting week, they say: "U.S. railroads originated 288,114 carloads during the week ended May 22, up 10.6 percent from the comparable week in 2009, but down 12.4 percent from 2008."
So the economy has improved from 2009, but it is still well below the level of 2008.
And that's the truth.
What does the state's sales tax data say? All this good news should be pointing to improved state budgets.
Needed my 9 year to figure out the damn math problem.
Muffled cough, muffled cough
This guy is a fcking joke...forget all this noise.
Are we expected to stay with ZIRP forever? No! Well somethings going to give.
They will either devalue us into poverty or start a new currency system.
Government cannot be the primary job creator. Continued growth in government employment will have a ripple effect in all aspects of the economy - from the strain on the economy to shift payment to pay for the costs, to increased regulatory oversight. It reminds me of Soviet Russia and the factory government employment. The jobs number should be viewed negatively when there are more government jobs created versus private-sector jobs. For every government job created, you can see direct or indirect taxes increased by $150,000, which is then paid fractionally by you and I.
Oh, I think it won't just be census summer jobs only... it will be a few hundred thousand (at least) mythical pieces of air known as birth/death model jobs.. myths that even the BLS has had to admit are fictitious because its own math models have been admitted to have been flawed when coming up against the conditions experienced in this Depression. They even admitted so in public and cut off about 500,000 phony jobs from their report around the first of the year, and admitted they would have to do so again this year.
http://twentypercent.tv/2010/06/01/center-for-freedom-and-prosperity-there-are-too-many-bureaucrats-and-they-are-paid-too-much/
Leo,
Take a look at the Gulf oil spill.
People in Pensacola sit there and actually wonder if the oil is going to tar their beaches and absolutely destroy the local economy this summer.
Amazing isn't it given the oil has been gushing for 44 days, maybe it's stopped or slowed this week, but most likely will be gushing for another 90 days (twice as long as it has already been gushing.)
Amazing because that little bit of oil that is offshore from Pensacola is only the leading edge of the waves and waves of oil that will not only wash ashore along the beaches of Pensacola, but additional hundreds of miles of beaches that haven't even been mentioned yet.
But, buy Disney because those folks will go to Orlando instead.
It's all good.
lol.
not.
I can't imagine why anyone would buy a piece of residential or commercial real estate along the Gulf until we know the long-term effects of the spill.
It'd be like buying some nice farmland on the outskirts of Chernobyl.
Yes, we sent out an advertisement for a basic assistant position, $25k - $30k p.a. wages, basic benefits.
400+ applications, including many, many MBA's.
Now, that's JOB GROWTH YOU CAN BELIEVE IN!! It is ugly out there, getting uglier, this is one of Leo's worst pieces (no offense Leo, I love your pension work).
Masters in bookkeeping accounting?
The same MBA's are probably fighting over the night-stocking jobs at Wal-Mart too.
MBAs are overrated. Let them learn from the school of hard knocks. I read all these comments and all I see are personal anecdotes. Do you want me to share with you all the job interviews I've been to where they see me limp because of my MS and give me this look of pity, then a nice, polite letter stating they found a "more suitable" candidate. The unemployment rate of the disabled is a travesty - 70% in good times. But when I analyze the economy, I take personal experience and emotion out of it. Same thing with the stock & bond market. No emotion, just rigorous analysis, focusing on leading indicators.
Oh really. Pension plan managers are way overrated. I sense a grudge against MBAs otherwise you wouldnt even bring the degree up.
Rigorous analysis is overrated too.
Why do you even need it? Isn't everything a BUY BUY BUY!!!1!!111
LOL, most pension plan managers are MBAs, and yes, they're overrated. Very few pension fund managers truly deserve their compensation. I harp on MBAs because people consider them gods in the business world. Whatever, did Sam Walton have an MBA???
If you compile enough personal anecdotes from around the country, emotional or not, the sampling becomes pretty solid, no?
Totally agree on the MBA's, most of them are no-talent shitheads, no doubt. The point is that they are dropping their pants for jobs that are "perceived" to be below their talent level, because they don't have any choices.
Also agree on the disabled issue, I think it's disgraceful.
I agree! No amount of wishful thinking is going to turn this economy around. How many of these jobs are real jobs and not BLS vapor jobs? I just don't see any real pickup in the jobs. And I ought to know. I am on month 11 of UI.
Aimlow Joe was here.
http://www.aimlow.com
I wish you the best of luck sir.
What's the most "bullish long-term" part about Europe?
Is it their collapsing common currency, well below replacement birthrate and unsustainable entitlement demographics, their large unassimilated Muslim population or the terminal condition of their unicorn and rainbow state welfare system?
Years and years of "American Pickers - European Adventure".
Watch as our team of pickers loots priceless artifacts from destitute European nobility who have been collecting junk for centuries. Wednesdays at 7:00 E.T. How much for this old crown?
That's a great show- and I'm looking forward to them cruising the small towns of Old Europe.
"Hey, turn right here and lets check out that old castle! There's some old Citroens parked by the moat. I bet they got loads of cool old junk that we can dicker for!"
Maybe that it'll make a great open-air museum in 50 years or so?
Trying to be helpful here...
I can tell you that my small business has hired four people so far this year. Three have not shown up in the numbers yet and won't till I file a quarterly state report in July.
I own a small business. Nobody asked me about my outlook but I will tell you that things are not looking so bright. No way am I hiring until I at least get remotely close to my capacity. Just my 2 cents...
I will give a sample size, so small that it is pointless, but something to think about nonetheless. I own a small business. I have spent some money that I wouldn't have ordinarily spent... downsizing. It appears that my capital expenditures are up and my sales are up, but the capital is preparing a new warehouse space that is 40% smaller than my current one(which will be empty by the end of the year which my landlord doesn't know yet). My sales are up a little due to a tremendous increase in the inventory that I am selling at cost or lower in expectation of downsizing. My income is up a little because I cut hours to three of my employees 15%(while cutting their pay 10%). Anyway, statistics are what they are, but....
Next year I plan on having a down year, but feel that I will be in a better position for the economy that we will have(and deserve probably).
Always nice to hear from small business owners. Good luck to you.
I hope you're right, Leo. Haven't seen anything that looks like a permanent upturn with my own eyes, though. It's ugly out there, and getting worse, from what I see.
I live on the Space Coast in Florida and had dinner with a Harris employee who lives in Palm Bay. He spoke about how he doesn't really see anything bad. The restaurants and malls around him seem busy and he really doesn't know anyone affected by what's going on.
Should I have told him that his paycheck is only there because Uncle Sam taxes the rest of America and pays him?
Should he look up the coast 25 miles to the area arond Cape Canaveral and see what happens when Uncle Sam decides not to send tax dollars his way?
6,000-9,000 soon (and I mean within the next 9 months) mostly well-paid folks are going to be unemployed.
I expect this will rather devastate local businesses...and so on and so forth. He will probably notice this, but not really think about it very much.
CDS Global closing here in little town Iowa. 300 jobs gone and a boarded up building. yep, things looking up.
A diverse range of transportation indices has turned up too:
Rail:
http://railfax.transmatch.com/
Dry bulk shipping:
http://stockcharts.com/charts/gallery.html?$BDI
Shipping index in Germany:
http://www.harperpetersen.com/harpex/harpexRH.do?showData=true&period=9&...
Container rates:
http://www.vhss.de/popup_new_contex_graph_splines.php
How big the uptred is might be open to debate, but there are a lot of data series turning better right now.
We will see. Could you post industry links to data for more than the last 2 years? Or does that make it look too much like a dead cat bounce? I could understand why the rail companies wouldn't want to publicize that!