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NFP – SSA & Ben
After the ADP numbers came out last month but before the release of the NFPs I wrote this:
I look
at the (ss) payroll tax data in the context of the Non Farms Payroll
numbers. Does the data from SSA have any predictive information on this
critical monthly statistic? Not with any precision; has been my
experience (and frustration) to date.
With
that as a caveat, I have looked at this and concluded that the ADP
report this morning suggesting a 300k increase in payrolls is overstating the number. We shall see soon enough.
Turns out the actual numbers were on the soft side of estimates, well
below what the folks at ADP were saying (and charging for).
This Friday we get a look at payrolls for January. Today the Social Security Trust Fund released the Payroll tax information for February:
This is a look at the 2010 full year data including details for Jan. and Feb.:
It is my observation that there is a correlation between the relative
change in tax receipts and changes in general employment. An important
consideration in this is; “Does the forward month of data (February) give information regarding the month(s) preceding (January) changes in payrolls?”
If there is a correlation it is least obvious (to me) when payrolls are
declining. It is somewhat more obvious when the level of employment is
little changed. It appears to be most correlated when payrolls are
expanding. This observation is reasonable as there are many time lags
between someone losing their job and some time later when they get the
last paycheck. On the other extreme the computers at SSA are relatively
quick to recognize new hires as part of their forward month estimates of
receipts.
My look of the numbers is that there is some clear evidence of continued job growth. My own way of calculating the January NFP comes up with an estimate of 310,000. This will not be the headline number for January. The headline number (according to my formula) will be 210,000. There will be a 100k prior revision (60k Dec., 40k Nov.)
I wouldn’t bet on my own numbers. Not yet at least. Should these numbers be what we get (more or less) it will come as a surprise. Last I saw the estimate was for +140k.
We have been in a rocky trading range for the long bond for six weeks.
We’re pretty much at the bottom end at the moment. A hot NFP number
could bring a downside break in the range. If we break towards 4.7% we could move quickly to a five handle.
Should we see evidence this Friday that payrolls are in fact improving it will be great news for Ben Bernanke. Or will it?
An "above expectation" number on Friday will bring WTI to $100 in a
week. The rest of the commodities group will move with it.
At some point someone of importance is going to tell Ben to get
his foot off the pedal. That his policies are no longer necessary and
have crossed over to being a destabilizing global force. It’s going to
be very hard for him to say “no” when gas is $4, food is up 15% and payrolls are rising at 200k a month. That debate could well start this Friday.
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G'night sheila.
You like observing japan? i have this from AEP in his predictions for 2010.
didn't happen but this year??
'The shocker will be Japan, our Weimar-in-waiting. This is the year when Tokyo finds it can no longer borrow at 1 per cent from a captive bond market, and seemed such a good idea at the time.
Every auction of Japanese Government bonds will be a news event as the public debt punches above 225 per cent of GDP.
Once the dam breaks, debt service costs will tear the budget to pieces. The Bank of Japan will pull the emergency lever on QE. The country will flip from deflation to incipient hyperinflation. The yen will fall out of bed, outdoing China's yuan in the beggar-thy-neighbour race to the bottom.
By then China, too, will be in a quandary. Wild credit growth can mask the weakness of its mercantilist export model for a while but only at the price of an asset bubble. Beijing must hit the brakes this year or store up serious trouble. It will make as big a hash of this as Western central banks did in 2007-08.'
see ya around.
Yes, corporate profits are high and new jobs only being part time.
its bad.
this website has really helped open my eyes to that aspect of things.
you seem to know a lot about currency. is that not very short term and dependent on many variables? i know little about that.
i keep it simple - oil and gold.
i'm thinking of getting a farm after all the folks on here putting the hook into me...
No hurricane - oz is the size of the usa and the area about to get hit is like florida without the miami vice - its sparsely populated so the impact wont be big apart from sugar - tons of it up there going to be destroyed.
i hear you about china though - a site i subscribe 2 keeps a close eye with people coming and going so you get the feel on the ground - they say a lot of the housing is bought in cash but corruption is a problem - i think with your conviction i'll bring in my china doomsday in by a year or 2. ;)
if you see the chinese problem with population control then you dont see them as an aggressive threat like many in usa?
i just got back from las vegas - i had a great time - boosted your economy a bit..
What you bring to Vegas, you leave in Vegas. Thanks for the contribution, though. :D
I don't think many Americans see China as an aggressive threat. I think most Americans blame their government for giving away all our manufacturing to the Chinese. Our beef is not with them, it is with years and years of lax regulation that allowed our industry to be basically stolen wholesale so that they could sell our stuff back to us cheaper.
It just doesn't make any sense, save for a few conspiracy theories.
So which currency pair correlates the best with Chinese power consumption? I bet it is the AUDJPY...
hi orly, keen to talk on this if you like
i follow this closely obviuosly cos i have a lot riding on it.
1) people have been predicting china's demise for about 10 years here in oz but it hasn't happened yet - it will happen but probably not for a while yet. can give you my reasons if you wish . i suspect 3 or 4 years yet.
2) there is a big tax dodge called negative gearing which supports house prices here - having an investment property is the national pastime - we have long periods of static but no major falls - people here are too cocky i agree but there would be no fall >20%, too many people would jump in....
negative gearing means you can claim the diff bwn your mortgage payment and your rental income off your tax. it was meant to keep rents down but is a good way of saving and great when you are well off.
where r u located - your avatar looks 1960's bavaria. and i mean that well.
It is ca. 2005 in my backyard! Bavaria sounds romantic, though.
I am in Texas.
Are you going to get the hurricane where you are?
I have never heard of this negative gearing. I had always assumed that house prices got out of control because of the rental nature you speak of but if you can write it off on your taxes, that changes things. Did not know that.
Unfortunately for the Chinese, though, their ability to misappropriate resources will come back to get them sooner than you think because the difference this time is wage inflation in most of China.
There have been spikes in food prices before, as there is now, but the people are beginning to demand a greater wage than they have been being paid. I don't see how the government can pay people more while building cities to nowhere unless they lay off a lot of people...which opens its own new can of worms.
In short, the Chinese are really in it this time. This time really is different.
:D
Did you know the AUD directly correlates to chinese electricity consumption.
i cant post graphs but i'm sure they are there on the web.
i guess that makes oz quite reliant on china....
Hey Bruce,
Took a modest position and shorted the GBP tonight at 1.6155 with a stop at just over 1.63..........wide divergence on the 8 and 4H RSIs and slow stochastics in very O/B
Who knows but it is riding above the top of a day range dating back to Aug 2010.
Of course Hoenig may not help however M King may think something different.
How do you think of a companion trade with the EURAUD short, too? Pairs don't like to travel alone...
:D
Don't know and haven't followed it too closely. Did short the EUR/CAD last week at 1.3665 prior to USD GDP.
Made some points but after the AUD/USD (shorted at 0.9940 and closed at 0.9889) failed to break 0.9875 I bailed on my short trades.........took it as an indication the one day selloff was just that.
This is a difficult market so am using a lot of caution with entries and stops and not looking for homers.
North Queensland is about to get hit by a once in a generation cyclone (hurricane in usa),
if the damage looks ugly tomorrow - and it will because there's jungle and old houses mostly - the AUD will take a hit for a while.
Best to be long AUD tho' - we don't even know what we've got out under all those deserts , no oil but everything else.
Australia is too dependent on exports to China in the commodities arena. China is slowing down. Housing prices are getting out of control and there is a possibility of a hard landing there. The damage to the coal industry will have a wide-spread impact on the national economy.
All these things spell decreasing interest rates, therefore, a declining Australian dollar.
But, the Euro is in a world of hurt and has just been bought to the hilt. Some retracement can be expected.
The employment numbers are no big deal. I am doing assignments for lower fees than when I started in 1986. I am doing lots of work, but I have 25 years of experience and a good repudation. I am analyzing a lot of credit/risk rating changes on CRE and a fair number of foreclosures. New sales transactions are limited and refi's even more so, but that's just me. My color printer cartridges (4) are $160 each with tax, gas is $3.50/gallon and legal paper is now $50 a box. Clients have me PDF the reports, then have me print, package and ship the final reports to them all at my cost. Why? Because they can.
The NFP may be up or down and I may be paying the same in taxes, but I am working my ass off to do it. I had some remodel work done - the plumber is broke and just lost 2 (maybe 3l) rental properties to foreclosure - he came by on Monday for a draw. The carpenter is broke and has been trying to get a loan mod for a year. He cannot go more than 2 weeks w/o a "draw" - no more draws for him, he is swirling the bowl. The electrian is eeking by, but he is divorced and other than buying his wife outta the casa at the top of the market, he seems to keep his head above water... all these tradesmen have been at it for a very long time. My buddy who used to get $52/hr to do custom homes in tahoe was working for $25 until his boss cuddn't pay him - he has a new gig but refuses to say how much he is getting paid - it might be about the same as he earned in the early '70s when we graduated high school. I go into people's rentals every week and Main Street is hurting; so, I know the NFP might move the market, but...
I do know 2 people that got hired. One was working on the Border fence and after being laid-off in November, he has started on a freeway job - all gubbermint money. The other guy is a 60+ y.o machinist who got hired after being UE for 2 years. He is working on some sort of defense contract job - the pay is higher than his past job, which was "shipped to China". Again, gubbermint cheese.
Very interesting. Thanks for sharing.
Sadly, most on Main Street blame themselves - sure, they shouldn't have gotten the HELOC, but where would we all be without the Federal Reserve debauching the big picture?
I don't think Ben can take his foot off the gas, ever. He has to keep the pedal to the metal until the engine blows. What will they do when the death smoke starts rolling out from under the hood? What is their next move when the last QE blows up in their face?
one explanation I quickly dismissed is the cut to payroll tax that was agreed in Dec. That would not show up here because as part of that legislation Treasury would make whole the SSA.
correct.
ADP has been off for the last few months. This SSA data shocked me. The Jan 2011 Total FICA is tracking below the 2010 number. I don't understand how this is possible. There are about 1.5mm NET new workers in the workforce, personal income have grown over the last year and there has been been employment growth. How is none of that growth showing up in payroll receipts?
@LehmanRefugee
v.v. .good questions
see http://brucekrasting.blogspot.com/2011/02/nfp-ssa-ben.html#comments
to get some answers
alx
Looking at the 2010 $641 billion SS taxes, I couldn't help reflecting on GAAP accounting and the impact that would have on the "reported" deficit. lol. Good work/discipline Bruce, may the force be with you - I'm stuck in the Maya of Wonderland.
I think we can all agree that the economy is still but a shell of what it was pre-Lehman. Yet, the markets are moving higher than that yesteryear mark. Only explanation - Inflation. More correctly - Stagflation.
Man, it's gonna hurt real bad when it ends. Proportionately more so with each puff of air the Fed pumps in. Can't grow your way out off the roof.
Has it occurred to anyone that the economy "pre-Lehman" was a shell itself?
Perhaps what we are coming to is what the economy should/would have been had all the froth been blown off the top of this toxic brew.
Either way, it's gonna be a hella hangover.
I hope we have mild winters for everyones' sake. Another one like this while the wheels are falling off is going to hurt.
You got that right.
QE is about the bank-owned FED taking toxic assets off Wall St. banks (which own the FED) in order to keep the banks liquid enough (reserve ratios) to buy stocks owned by each other thus increasing asset values owned by the Wall St. banks, Who pays for the FED purchases of dead assets previously poisoning the Wall St. banks? Why U.S. taxpayers of course, the "debtors of last resort". Whewn will U.S. taxpayers be forced to settle the debts? Watch the CPI, gold, and U.S. dollar which should move up, up, and down thus shifting the hyperinflatiuonary outcome directly onto the shoulders of the middle (sucker) class.
According to this website, the nonfarm payrolls has missed 7 years in a row in January (Feb release). This is likely due to the large birth/death revision that is done.
http://www.forexfactory.com/calendar.php
However, the market hasn't cared that much. NFP day performance.
2010 0.2%
2009 2.6%
2008 1.2%
2007 0.1%
2006 -0.6%
2005 1.1%
2004 1.2%
2003 -1.1%
Searching for a correlation between numbers (two separate datasets...) would assume that the numbers were reached along the same parameters and algorithms. These clearly were not. Agendae must be taken into account.
If the data were not consistently measured, then the correlation would be more or less random. Sometimes you can get lucky. Assessing the relationship here would be like trying to determine crop yields in Iowa by measuring changes in the statewide sale of diesel fuel. It is possible to do, if you're lucky, but it is plain to see that there are too many intervening variables to make it a worthwhile endeavour.
Exactly right. The correlation is a statistic which *is* a random variable. Remember that the standard correlation measure is linear, and we hardly have linear markets with the private Fed induced distortions, etc.
Be very careful with measures that are intended for well behaved markets, which we do not have thanks to the morons in charge (ben's second Ph.D. thesis - classic!)
Otherwise, great work as usual Bruce!
Federal tax receipts were flat yr-yr in January. Boom times!
Gallup's surveys always seem closer than ADP. With the NSA numbers so high (above 500,000) there is no way jobs could be added. NILF will be the key...if that continued it's decade long trend (17% increase in NILF vs a 9% increase in population).
yes?
NFP will come in stronger than expected and Bubble Ben will keep the QE pedal to the metal (all talk, he knows he doesn't need QE3).
One of these months you will be right, but it hasn't happened yet since you've been posting.
Pardon me, I hate to have to remind everyone that I am a carpenter and, while I truly enjoy reading the articles and feedback, I don't possess the knowledge to fully understand all the information. But, this whole exercise in futility, your sentiment, seems to be designed to allow all the uber-wealthy customers(at least one has been the subject of a couple of articles here on zerohedge)(hedge fund guy whose mother was his inspiration) of my former employer, 22 years with, 32 years total in the trade, to maintain their unrealistic, unsustainable lifestyles. We actually had a customer(his wife, actually ) that felt the need to tell us(the tradesmen) that she had to fly to New York that morning to pick out some bath towels for her bathrooms. Yea, bathrooms sounds so yesteryear, but I don't know how the hoity-toity refer to that place where the rest of us go to take a crap and shower.
Iowa says its unemployment rate is decreasing. If I could find another , I'd quit the crap one I have. Been looking for a year, no jobs around here.
We are going to go through some stressful and volatile times as we steer between the abyss of deflation and the big deep dark hole of inflation, just like the example you pointed out where we undershoot and overshoot various data measures. These may be tradable at the sentiment extremes and one of only a few ways to make money over the next five years playing the volatility as the dow ends up at 13000 in 2016 with a rollercoaster ride in between with housing down another twenty percent and a mcdonalds.cup of coffee at four bucks. That is the optimist scenario as we finally put this behind us all of us older wiser and poorer in the process at a new sustainable equilibrium where balanced growth can occur, assuming government debt is on a sustainable path too. It is.very hard to be an optimist. All of you of.course know the pessimistic scenarios.
And all the king's bullshitters and all the king's QEs couldn't put the USA back together again.
The payroll numbers are probably out of sync with the employment numbers because payroll reflects furlough day cuts and salary reductions. Yet these folks are still employed. Pretty much all CA government employees are seeing this, outside public safety...which is next. Non Profits and other private small/medium employers are doing likewise out here and they all pay SSA. Just speculating, but CA is a big number.
Edit : chop off one day per work week and that equals 20% of a human unemployed. So every 5 furloughed equals one unemployed , at least payroll wise. Point is, it's a variation on underemployment.
Edit 2 : don't be surprised to see the furlough concept roll into the USG selected employees when budget shit hits fan. There will be many exceptions, of course. But the real goal is tinkering the official unemployment number down while the invisible underemployment number presses upward. Tax collection is the only accurate barometer, but next year the SSA figures are distorted by a 2% payroll tax decrease. Frustrating to analyze.
So they lie again? Shock and awe.
There was once a theory that markets top on good news. I wonder if the bulls will notice this is the same style of good news reported by Pravda during the Brezhnev era?
Not likely.
The only person I can think of important enough to get Ben off of the bus is Bozo the Clown. However, last I heard, Bozo was unavailable for comment.
Good insights Bruce, only problem being that QE has taken on the form of a CRUSADE and theology has more say than common sense at this point.
My primary question is why do we all have to be guinea pigs for thebenbernank's secondary doctoral thesis?
At this point it's a race to see if Hilary lets him keep his pistol long enough so he can do the "honorable" thing when there are millions of starving Amerikans outside the fED. Well, ok, I'll at least hope for "thousands".
Most Americans don't have the slightest clue why prices are rising. They won't blame the fed, they will blame greedy speculators aka you and I.
Keep a low profile so when the SHTF the masses don't know you have made "excess" profits from this crisis.
we unknowingly accept being guinea pigs because we are deficient in magnesium, vitamin d, omega-3 fatty acids, and sound money. (we are replete with fluoride, though.)
Cold-pressed salmon oil does the trick...
I'm still concerned that this type of uptick in employment is just an aberration - there are no new drivers of employment. While we may see improvement in employment numbers, the "recovering" numbers, to my view, really signal more of a "stabilization at a bottom" than a sign that robust gains in employment are around the corner. This is still nowhere near enough employment to make up for all the losses, and at some point those unemployment checks - ahem, stimulus checks - have to run out. Also, if there are employment gains, I'd want to know about the quality of those jobs, not just their quantity.
Ben won't say no until the TBTFs have adequate reserves and all their toxic crap is floating downstream.
...after which they will happily let the market crash and then buy it back for pennies on the dollar.