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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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WOW Leo, so soon everyone will be a Gubmint job holder, after theyve killed off about 200 million of us, thats the 'bullish future'??
Leo is starting to sound llike a pro-elite pro-government propogandist?
(sarcasm off)
Yawn, yup, everything is soooo great. I bet you $50, your chouce of currencies, that the unemployment rate hits 10.1% AND the BLS adds in at least 100K via the birth/death model. What you are missing, Leo, is full-time jobs are being replaced by part-time or temporary work, that is not bullish. The employment picture is not good almost 6 people for every job openeing is terrible. The average person is waiting 27 weeks to get a job, 46% wait much longer than that and those who are unemployed for a year or more are growing by the month.
I disagree with you. Things are better, for sure, but stabalizing at horrible is not exactly what I call a good thing and I believe all of this "good news" is extremely temporary. How can HP be laying off 9K people if things are improving? It is in the fabled tech sector where everything is fantastic! I mean tech executives pee silver and crap gold for Christ sakes, yet they are laying off people now? Warning Will Smith, Warning....
As far as solar is concerned, you are nuts. They do not work with declining oil prices and there are too many companies out there. They remind me of utilities in the earily 1900's when more than half went belly up in a few years. Google just launched a computer program to replace smart grid technology,so... buy GOOG instead.
Leo ;
I don't agree with your analysis.
The small business indicators may show some hope on the paper but its fake.
You are doing just like other economists, looking only numbers...
They don't show the Strategic defaults. Even in CNBC they started to talk about it, they say 30% of the delinquent mortgages are strategic and increasing, then people spend money and that's what you see in the optimism in small business. but if you go to the core, its heartbreaking.
Read the peoples mind, ask and talk with the people from each state, someone gave an example of Florida but you don't seem to buy this. I live in Virginia , working as an estimator to get a job to the company i am working for, there is 20% of the jobs our there compared with last year alone. We can go on like this only few months more ..
One can cherry pick statistics all they wat. Bulls or Bears. Bottom line is that people are hurting everywhere, and there are no REAL signs of it letting up.
Leo, I don't know where you live, what sort of bubble you reside in. But I'm here to tell you that in rural middle America things are shittier than ever. The reason I see that as an indicator is that people who live relatively modest to poor lifestyles tend to not be so affected by recession. They live in one all the time. When people who are living large if they eat out a dozen times a year are complaining, it's getting bad.
Dairies are selling milk for break even prices AT BEST. The timber industry is nearly dead. Construction is on life support. Our hospital is laying off nurses. Our clinic is cutting hours and not re-hiring nurses that leave. Pipeline work is at a standstill. Small towns and cities are cutting "non-essential" services. Bread winners are working at convenience stores. The list could go on forever.
Leo - From a guy with boots on the ground... (still working, luckily) I'll quote a guy who works for me. He's no academic, but he gets it, and summed it up perfectly in my opinion: "This fucker's fucked up."
So, let's see... 540K NFP is the concensus. Reading estimates that 417K of that is census.
This morning, ADP shows 55K private jobs, implying about 58K additional government jobs (540 - (417 + 55) = 58).
482,000 government anti-jobs supported by 55K private jobs. Almost 9 useless clock-watchers standing on the shoulders of one actual job. This ends well.
Especially with states having to borrow to pay for the 453,000 initial claims this week.
Only a matter of time until the bond vigilantes come along.
HAHAHA! 400,000 new Gov't jobs? This must be a typo or a BP-inspired crock-of-feces. But hey, have it your way: 820,000 new burdens on the back of taxpayers - aka more debt.
We need the ability to "junk" an entire post.
Hey, Leo, so where are your jobs?
"U.S. companies hired 55,000 additional workers in May ..... Economists surveyed by MarketWatch were expecting the ADP report to show 100,000 jobs added in May. "
http://www.marketwatch.com/story/private-sector-adds-55000-jobs-in-may-a...
there will be up months in employment data. that hardly means the bottom has been reached. and even if it has, it hardly means we are well on the road to recovery.
there are incredible issues that will hinder the recovery.
the millions of homes in foreclosure that haven't even reached the market yet. not too mention where do these folks then move to, especially if they are unemployed.
incredible sovereign deficits worldwide, the only solution to which is the uncontrolled printing of money.
state and municpal deficits that simply cannot be made up with increased tax revenues and will result in layoff after layoff in the coming years.
now that the majority of americans are on the ropes, obama wants to introduce cap and trade. yeah, let's take that (non-existant) leftover paycheck all americans have and tax them into negativity.
there will either be breadlines and tent cities cropping up around america or the government will be issuing debit cards to millions of people.
we haven't even begun to see what havoc is in front of us and Leo wants to say there it's all good?
public and private pensions are horribly underfunded despite having extraordinarily rosy forward annual growth rates. it's an absolute joke.
fortunately, the market is being goosed and that $1 share price increase in that stock translates into a tremendous increase in wealth for all those holding that share. if only they knew that new "market value" was truly imaginary.
The problem with the household survey is that many people who is working part-time (U-6 unemployment on the skies...) appears in the survey as "employed". Yes, more people are getting "jobs", as the household survey shows, but those are not Jobs, are "jobs" (part-time under-payment "jobs").
Welcome, americans, to a brazilian reality...
Murder rate will go up:
http://www.youtube.com/watch?v=ng9q5-xkNmE
Embora muleke!
ZH please do us all a favor and ask this idiot to move back to Naked Capitalism.
The drivel he posts here on a daily basis is getting tiring.
He's either totally incapable of critical thinking and doing his own analysis or he's getting paid to post the permabull "things are getting better" rubbish. Personally, I believe it's the former.
Sorry, Mr. T. I disagree. We should get contrarian views and air out both sides. The debate gets healthier and it often leads to very interesting posts and a rich lode of info from the other ZH'ers I would otherwise not see. It can be frustrating, but Leo tends to back it up pretty well even if we disagree with his point-which I do.
Seconded.
As somebody much more intelligent than I had opined: "True education resides in the friction between opinions."
+ 1
Me too.
I disagree with Leo but appreciate his willingness to take the
heat with mostly good humor. And just last week, he seemed to
be coming around to a more apocalyptic viewpoint due to
pension fundamentals in compete disarray worldwide...
NSA still above 400,000 and EUC still over 5 million, long term state still over 4.6 million....and SNAP crossed the 40 million mark. I'm sorry folks, but if they claim more jobs created than lost tomorrow, I'm calling BS. These numbers have stayed steady (except SNAP which is rising much faster than projected)...where did the 'new' workers come from? It's mathmatically impossible.
As a father who is in a crowd full of teen-age kids trying to find summer jobs, I can assure you that those jobs simply don't exist. They have been taken by older workers happy to take whatever part time work employers are happy to give them. Summer internships are few and hard to come by and summer jobs for kids in school are practically non-existent. As someone who loves this country, I hope you are correct. But the evidence of my eyes belies the statistics and the government's numbers.
Agree with MMan.
All the low-end jobs are dominated by Mexicans in my area.
My kid and other kids I know are locked out of the job market.
LOL. Bet the farm on it, Leo. Oh please bet the farm.
If you're so confident that the economy is picking up, end money printing, huge deficit spending, home rebates, unemployment benefits...
The fact is the only reason things look as good as you think they look is due to above. You may use the word "Bears" as an insult... but cherry picking stats you like & ignoring why is the real mistake.
http://www.businessinsider.com/into-the-abyss-the-cycle-of-debt-deflation-2010-6
Despite the widely reported green shoots, in May, the unemployment rate rose to 9.9% while paychecks in the private sector shrank to historic lows as a percentage of personal income, and personal bankruptcies rose.
http://www.financialarmageddon.com/2010/06/dead-cat-labor-market.html
Rebound in the labor market? Looks more like a dead cat bounce, where a great many of the jobs being created are either temporary, part-time, low wage, or stripped down, like those detailed in the following CNNMoney.com report, "Say Goodbye to Full-Time Jobs with Benefits":
http://theeconomiccollapseblog.com/archives/the-u-s-economic-collapse-top-20-countdown 18 - According to the Bureau of Labor Statistics, in March the national rate of unemployment in the United States was 9.7%, but for Americans younger than 25 it was well above 18 percent.Glad to have an opinion contrary to this site. Though you're well in the heart of the bell curve of the mainstream... interesting when the mainstream opinion seems contrarian when voiced in alternative circumstances... but then, that's not so clear... here, watch this video. It says what I mean, you know about broken systems and all (think HFT driven capital markets when you watch):
http://www.youtube.com/watch?v=AeV-DI09Q3w
Leo, thanks for the contrary opinion. When the economy turns yours may be a lonely voice, but right now I do believe that at the least, the trend is a sugar high. For instance, tax collections are up, but what is the ROI on the stimulus? The pace will slow as stimulus wears off, such as the 40% drop in mortgage applications following the end of the home buyer tax credit.
I agree that Europe's changes are bullish as well, the DAX looks no worse than the S&P 500 Index in local currency. But timing is everything.
The gov't appears to be attempting to drum up some talking points for campaign time. You have seen them here and you will know what anyone who is hawking them is trying to do.
I wanna send this one out to Leo and wish his Canadian Solar (CSIQ) a speedy recovery.
http://www.youtube.com/watch?v=25upz6PME3I
Good song, but I am still bullish on solars! I do not own CSIQ...yet...missed the big runup from $3 to $30, but it's on my radar now.
http://finance.yahoo.com/news/Hagens-Berman-Sobol-Shapiro-bw-1234898352.html?x=0&.v=1
Yes, SEC is investigating Chinese solar earnings now, instead of focusing on the next Madoff.:)
Most of these new jobs will be composed of:
1) Temporary census jobs which are already declining.
2) Mathematical adjustments by the BLS.
check out
http://www.shadowstats.com/
for the real scoop.
Meanwhile in the real world people are hanging on by their finger nails and their nails are cracking. The number of indicators that are down is so large I am suprised we are still talking about this. It is one of our many Kabuki dances.
The sad part is your words and effort have gone to waste simply because you chose to ignore the fact Barry's 2 trillion deficit bucks had something to do with this supposed recovery.
This type of growth will be short lived. No country or empire has ever had sustained economic growth based off of deficit spending.
Indeed.
You cannot keep out of trouble by spending more than you earn.
Who's this guy kidding? Yah, it won't just be census 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. Hurrah! Where's the pixie dust?
Hey Leo! Hahahahaha! Hahahahaha! OECD countries as a whole have a public debt to GDP ratio of 97.4%. We have 200 years of financial data from 44 countries from Professor Ken Rogoff showing average growth rates fall by 4% once over the 90% threshold and median growth rates fall by 1%. Recovery? Hahahaha! Hahahaha! Surely, this time it's different right? Apocalypse DOW coming soon from a zombie mob near you.
200 years of data sounds impressive, but in a new world dominated by technology, trade with BRICs, etc., I would be careful extrapolating too much out of this.
You forget the biggest single contributor, which has remained a constant force in markets since the beginning of civilization...Human Doings.
Leo,
How's all that new technology playng out in the Gulf?
"Its a new world", and it is different this time.
Lucy, you have some extrapolating to do.
SPY 500 in 1998 was around 1100, just like today. Nothing "new" here except 63 Trillion in unfunded liabilty.
http://www.youtube.com/watch?v=txlXcJDtDwM
Wait a second, you're admonishing others to "not extrapolate"? You're extrapolating an entire recovery out of cherry picked, granular data.
WORD
...UP!
+111
LOL
Oh...This time it's different?
It's always different. There are serious structural issues, but one way or another, we will deal with them throughs reforms, cuts and innovation.
It's still way too early to call a recovery; copper is bouncing like a yo-yo, houses have little impetus behind them, Oil is overhung and the Banks are living in some psychotropic alternate reality. Even granting that employment is off the bottom- Credit is still in a long-term decline. Last I looked, that's the fundamental driver. I'm happy if there's some real good news - but isn't this the part where the strong survive and the weak dissolve, see insider selling. A little Deflation would be good, or at least better than cost-push inflation without working credit. Look at it like that and the economy is on the wrong road with currencies moving in no known direction, hey isn't that stagflation if employment is described in terms of credit depth?
>>>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.
DUDE! i want what you're smoking. Small businesses creating jobs? Read this statement from William Dunkelberg, chief economist at NFIB:
“The steep recession will unlikely be followed by a steep recovery, the numbers just aren’t moving in that direction. Average employment per firm first turned negative in April of 2007. It has been negative for 10 of the last 12 quarterly readings ending with a negative 0.18 in April 2010 (seasonally adjusted). Since July 2008, employment per firm fell steadily each quarter, logging the largest reductions in the survey’s 35-year history.
Eleven percent (seasonally adjusted) of small business owners reported unfilled job openings in April, up two points but historically very weak. Over the next three months, 7 percent plan to reduce employment (unchanged), and 14 percent plan to create new jobs (down one point), yielding a seasonally adjusted net negative 1 percent of owners planning to create new jobs. The net percent of owners increasing employment in the last three months fell one point to a net negative 12 percent. April marks the 27th consecutive ‘no new jobs’ monthly reading.
There is little enthusiasm among owners to hire more workers, primarily due to continued weak sales trends.”
only 11% of small business owners have job vacancies yet you say that is where the jobs are created...
Here is a link to the NFIB's latest report:
http://www.nfib.com/Portals/0/PDF/sbet/SBET201005.pdf
Here, I would pay attention to the optimism index:
OPTIMISM INDEX
The Index of Small Business Optimism gained 3.8 points, rising to 90.6, barely exceeding the “90 barrier”. Pessimism persists but the Index is finally out of the 80s, at least for one month.
Importantly, small businesses only start hiring when they feel more confident about the economy. They lag overall hiring by big businesses, so don't be surprised if hiring picks up over the next 12 to 24 months.
The biggest problem with small businesses is credit:
http://www.nfib.com/Portals/0/PDF/AllUsers/research/studies/Small-Business-Credit-In-a-Deep-Recession-February-2010-NFIB.pdf
But credit lags the economic recovery. Banks will only open up credit to small businesses once they feel the economic recovery is firmly entrenched.
Bottom line: Do not use NFIB reports to gauge future employment trends because it lags. Best to use the household survey which leads payrolls at turning points.