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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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I don't know how tpo reach you but on the cover of todays Investors business daily is an article about union pension funds you may find interesting. also thought this: on muni debt:
http://www.bloomberg.com/apps/news?pid=20601010&sid=airOwCWviFuU
the interesting thing is that republicans are taking a hard line on union pension debt while of course spending on the war and the wall street bailout. I predict end of the party if they don't help out with pensions. way to easy to use their votes against them and against the "average Joe". even conservative people won't understand rescue the banks but not the working guy who has worked his whole life.
Leo -
Speaking directly from SE Florida, I can honestly say your opinions and links are of people NOT on the ground. In an area of 5 million+, things are bad. In our area (near the beach - in about a 2 mile stretch) we saw 100+ small businesses close shop last summer, and a new wave of closings has been going on over the past several months. Probably another 100+, but at a much faster pace. Seems as though they were holding on by a thread, waiting for things to get better, AND THINGS ARE ONLY GETTING WORSE. These are (were...) well-established businesses, many 30+ years, now GONE.
On the bright side (not) we have seen maybe 10 new bank branches open, and maybe 10 other small businesses open their doors.
Bottom line: There is no economic recovery here. Perhaps SE Florida is unlike the rest of the nation (yes, all RE is deflating still here) - but ask yourself, are we an abberation, or perhaps simply a leading indicator??
SE Florida is suffering the nasty effects of a huge housing market bubble. I don't exactly use this region as a gauge of national employment trends. Stop using personal enecdotes when it comes to economic forecasting. If you lost your job, I feel for you, but you're in no position to tell me that the sky is falling. Leave emotions out of economic analysis.
Leo, bless your heart... (That's what we say in the South when we don't have anything nice to say...)
Anecdotes DO matter. And these are not stupid people you are addressing, here. Given enough anecdotes, from an evenly distributed sample, and you have An Event.
There's ONE anecdote that REALLY matters: Math teachers. And the lack or surplus thereof. I AM one, and our schools in Georgia (a relatively well-to-do state considering the circumstances) are laying them off. Let me... try that again...
WE'RE FIRING HIGH SCHOOL MATH TEACHERS!!!
That's like your body burning muscle tissue, because there's no fat left or calories being consumed. This is a very reasonable litmus test, not only considering present circumstances, but future plans as well. I weep for the generations.
Leo, the eternal optimist. I think God and the Man Jesus for ya. You say true, I say thank ya.
But seriously...
I willfully cherry-pick my data, but don't you start using anecdotes!
What a stinking crock.
"I don't exactly use this region as a gauge of national employment trends"
Oh Leo, Leo. Are we back to the "Housing bubbles are regional / There's no such thing as a national housing bubble" argument? Apparently some people don't know that argument collapsed in 2007. I guess we had better not use Las Vegas as a gauge either. Or Seattle. Or North Carolina. Or.. anywhere in California... or... etc.
Funny that you refuse to use Florida as a gauge for growth because you consider it to be particularly "nasty", but you have no qualms about using ("nasty") 2009 as a metric by which to measure current growth.
And for that matter, stop with the silly "rate of growth" and "percentage change". Wake us up when these blips translate into actual progress.
ie: A man starts gambling with $100 and loses all but $1. Then he doubles it and suddenly has $2. Woohoo, 100% growth! Recovery is in the works!
ps: Your unemployment numbers don't address reductions in household income / underemployment.
Fail.
I did not lose my job, and my economic analysis is pretty unemotional... I can see with my own eyes what is going on around me though, no? I do believe most all of our day-to-day lives revolve around our local economies, and at 5 mil+ in this area alone, ummm... that's more people than about half of the states in the US. Just sayin' - it's a pretty big sample.
I am fully aware of the RE mess here, and many of the after-effects. So banks are marking-to-market all over the rest of the country? What correlations might be drawn from the conditions here to the broader economy when banks finally mark-to-market?
Or shall we simply print our way to increased RE valuations so as not to crash (more) banks??
Apply Force... I live on the Fl East Coast a bit north of you and it is very bad here and getting worse. Hundreds of small and some not so small businesses have closed and boarded up and the number of empty residential homes and apartments is unbelieveable. I have lived here since 1979...I know what a normal down turn looks like and this is not one.
Florida has done an excellent job of keeping it's very bad local and state budget shortfalls out of the local news but after the upcoming election the shit is going to hit the fan.
Are a lot of state/local employee jobs going bye-bye green shoots?
Is all that plywood over glass green shoots?
More people leaving Florida than migrating here...is that green shoots?
Maybe there is a recovery going on somewhere but it is not in Florida.
how dare you rely on your own experience. Don't you know that experience is off limits for government and academic analyisis
http://www.youtube.com/watch?v=36O5FaGvlms
Dude, it's anecdotes. Creating 400k government jobs and 80k private sector jobs won't lead to a sustainable recovery.
Here in SF Bay/NorCal, the jobs situation is bad but improved.
Real estate is done crashing for now but taxes will g up steeply soon.
Having said all that, Sancho is right.
Until proven otherwise, you have to believe the national job
number is due to firing/rehiring gov't census workers not organic
job growth in the private sector.
You mean 80K Walmart jobs.
Since Mish has already done the heavy lifting I will direct you to what he has to say about the so called recovery... Hat tip to Mish.
Disputing the Alleged "Checkmark Recovery"
http://globaleconomicanalysis.blogspot.com/
Except for consumer credit all other charts point up and exactly that is the claim; not a new high.
With all these new jobs being created, it should be easy for the 500 to 600 people who will be losing their job at Citigroup, the 9,000 who will be canned at Hewlett-Packard, the 'thousands' David Paterson plans to layoff to meet the budget in New York, the 300,000 school employees that are in danger of losing their jobs to work assembling components for the tech sector to make up for the 'excessive inventory de-stocking during the downturn.'
Is it possible that orders are coming in overseas NOW because tomorrow everything on the dollar menu will be fi-dollah? ($5)
Following money printing, in the Wiemar Republic unemployment went from 9% to 1% but then it went to 30%+
Worthless lies. Worthless Government.
does drug dealing, identity theft and prostitution count cause those are up?
My pimping business is on the up and up, I'm thinking of doing an IPO later this year while my revenue trajectory is solid....
I was thinking of doing an initial pubic offering too but I had some unsettled business with the underwriters. Still, I got plenty of dudes interested in a firm commitment.
Leo,
You are 100% correct. With the census folks allowed to hire, fire and re-hire workers, NFP has to look good. Buy Buy Buy.
In fact I say 700k is an understatement.
Confucious say: Don't listen to man who sold house and wife to get balls deep into junky solar stocks!
Ha Ha Ha
And don't include idle fishermen et al in the Gulf of BP - and yes include klean-up krews et al. Hooray! Amerika is back to work!
If only they could classify those receiving unemployment as "telecommuting". Do it O. Do it for the team.
Clearly, Obama thinks trading out of a 60k + health ,career type job, into a just over minimum wage, part time or temp position, no health benefit type job...is an even trade!
He is either stupid, or a liar.