This page has been archived and commenting is disabled.
Still Scope for Optimism on U.S. Jobs?
Submitted by Leo Kolivakis, publisher of Pension Pulse.
The perils of predicting US monthly payrolls! To my surprise, there were no huge gains in the December payrolls to spook the bond market on Friday. The bond market remains calm, for now.
So
where did I go wrong? For one, I should have listened to my bond trader
buddy who told me he was going long ahead of report and then short. He
called me up today to remind me he was right. He told me that the
10-year bonds will trade in a range for a while and he doesn't agree
with Bill Gross who sees yields climbing above 4.50%.
He also
reminded me that there is a natural upper cap on bond yields. "Remember
what we talked about a while back, at 7% or more, pension funds will
lock in those rates in a flash, drying up supply."
I made other
mistakes on my call. December is not a time for hiring people. Most
companies wait for the new year before they start hiring again. In
December, they're in holiday mode. Also, there is a huge supply of
Treasuries hitting the market next week, so maybe they didn't want to
spook the bond market right now.
But there is something else I
forgot. One of the best eurodollar traders in the world trades his own
account out of Montreal. He never trades in anticipation of the news,
he trades the news. This also reminds me of one of my former bosses who
traded currencies many years. I used to go into his office and ask
him so where are we heading today? And he would always take out a
quarter from his pocket and tell me "you tell me."
Having said this, I still think it's only a matter of time before we see significant gains in employment. The ISM New orders came in at 65.5 in December,
following a reading of 60.3 in November. This is a leading indicator
for the manufacturing sector and bodes well for employment gains in
that sector (which was crushed in the downturn).
According to the Bureau of Economic Analysis, profits before taxes increased to $157. 9 billion in the third quarter,
compared with an increase of $90.6 billion in the second. Moreover,
real exports of goods and services increased 17.8% in the third
quarter, in contrast to a decrease of 4.1% in the second, and real
imports of goods and services increased 21.3%, in contrast to a
decrease of 14.7% (positive for domestic demand).
When new
orders, profits, exports and imports are all surging at the same time, it bodes well for the labor market. Moreover, Stefane Marion, Chief
Economist and Strategist at the National Bank of Canada, had this to say about today's unexpected drop in payrolls:
The
U.S. lost 85,000 payroll jobs in December, a number that was below
consensus expectations (calling for zero growth) and our own estimate
calling for an increase of 85,000. The December outcome comes on the
heels of an upwardly revised gain of 4,000 jobs the month before. As it
turns out, November was the first month of positive job growth in 23
months.Even if December comes
as a disappointment, we very much doubt that it signifies a relapse in
labour market conditions. The temporary help supply agencies added
46,500 jobs on the month, the fifth consecutive monthly increase. This
brings cumulative job gains to 166,400 in that industry over that
period.As today’s Hot Chart shows (click on chart
above), the growth in help-supply agencies remains strongly suggestive
of overall job creation. In the meantime, consumer spending should
remain supported by the continued growth in the economy-wide wage bill
(total hours worked times hourly earnings) which increased for the
fifth time in six months in December. As the chart above shows, the wage bill was up 2.2% in Q4, the largest increase since the onset of the recession.Even
if the outcome of the December jobs report does not change our views
about growth prospects in the U.S. we recognize that the soft pace of
improvement in labour markets means that the Fed has more time to
remain patient before raising interest rates. As a result of this
morning’s report, we now expect the first Fed rate hike to take place
on August 10, 2010 instead of on April 28, 2010.
Stefane
and his team are among the best economists in the industry and I trust
their judgment because they have made the right calls, even if they
were a bit early sometimes.
But for those of you who only see gloom & doom, I recommend you read Albert Bozzo's article on CNBC, Why Job Growth Will Be Weak—And Painful—This Time.
I prefer to look forward, not backwards, when looking at changing
economic fundamentals. One disturbing trend that concerns me is that job bias claims based on disability and religion are rising.
»
- advertisements -
• Many people see technology as a solution to some of the problems that exist on our planet. It’s true that technology can be used for good, but with new developments come new challenges issues. The digital divide is one such issue, one that people are actively trying to overcome.Jimmy
info@ibowtech.com
www.onlineuniversalwork.com
As, unfortunately, a non-participating member of the US workforce, it is encouraging to me to see temp jobs get created for the 5th month in a row! This means my next temp assignment is right around the corner. The hourly rate I earn will probably represent an approximate 50+% cut in gross pay and no benefits, but one has to do what one has to do.
Nevertheless, I am committed to continuing to spend as I did when my work was of a more permanent nature. Oops! I can't do that. My credit card issuers have cut my limits while I was not temping and, well, wages representing a 50+% cut in pay just don't go as far as my more permanent wages did.
Maybe the price of oil will collapse again; that would sure help my new economic reality. Damn! Some are forecasting a price per barrel of $100 for light sweet crude in 2010; so much for oil collapsing.
I've got it! I can work TWO temp jobs! Granted, I will be working 75-80 hours a week and will never see my wife and kids. At least my wages will be equivalent to my wages from my "permanent" lifetime. Shit! The wife says this doesn't work for her; she needs at least a little help around the house/raising the kids but all I do is sleep since I took the two jobs.
Anybody arguing for meaningful economic recovery is failing to consider the above scenario (and similar ones) playing out in countless household bedrooms and kitchens.
well, at least you've got the excellent health benefits from temping, no? lol!!
Leo. I'm no pension pussy. I'm a short-seller. If I could short you and the pension funds, I would. In truth I'm suprised you aren't running a pension fund. They are all stupid bulls. You establishment fuckers are already gaming me. I'm not giving you my name. I have suspicions that you are paid by the government to spout bullish propaganda like the rest of the media. I see right through you. I do have a perfect job for you. You could go to work for that stupid crossed-eyed bull, Jeffrey Kleintop.
Short-sellers are an odd bunch. I used to allocate to them a tiny fraction of assets. Their performance was too volatile but kicked in in very bad years, like 2008. Then again, buying some put options is just as good if not better than most short-sellers. Only a handful worth investing in and I am sure you're not one of them (just from comment above). You sound like a very angry boy. Get over your issues. Therapy can do wonders even for people like you.
Leo,
I agree 100% with your last comment (188775).
I left University here in the UK (with a science degree) during the early 1980s recession - it took me over 2 years to get a job (the amount of gratitude to my parents for their support during that time as well as their contributions while I was at University I still don't think they're fully aware of) - I was either over qualified, not experienced enough or didn't get responses from my applications, with one or two exceptions from people who wrote personal letters back. I thought I was unemployable and my self confidence, even today, still reflects my experiences then.
Your posts are very valuable because (personally speaking) they represent part of the spectrum of analyses that ZeroHedge publishes that we will rarely see in the mainstream media. If I disagree with with any of the viewpoints but they have made me THINK that's a good thing.
Do I think you're TOO optimistic? No. Are you out to lunch? Most definitely not, I really enjoy reading your posts, they are cogent and valuable inputs.
Do I pray we never go through another Great Depression? Yes. BUT, if we are headed there, I want to be aware so that I can prepare, rather than believing the powers that be who are only interested in the next election or the next bonus paycheck - I want to be treated as a thinking adult who can respond in appropriate way rather than a child who is always assured that everything will be OK.
DavidC
Well said David C....thanks for sharing your thoughts.
Hey Leo---
Always enjoy your posts. I'm 50 and remember the 81-83 recession all to well. Pessimissim is always rampant during times of duress.
No one knows what the future holds, but since conventional wisdom is nearly always wrong, I think that you are right.
Conventional wisdom holds that we will face a long slow climb from here.
And that global warming is caused by CO2 emissions.
And that the bottom is in.
I hope I'm right because there is nothing more that I would like to see than people get off unemployment and back at work. I know first-hand how tough unemployment can be on one's mind and body. The dignity of work is very important can lift one's spirit, just like the loss of a job can be devastating and demoralizing. As far as 1932 or 1982, I do hope we never experience this ever again. You can accuse me of being too optimistic, out to lunch, or whatever, but I pray we never go through another Great Depression.
Leo,
I would like to add my thanks to you for sticking to your guns, staying very courteous and adding to the conversation by forcing all of us to think through and double check our own assumptions.
Well done
Leo,
You say "maximum skepticism on the job front is typically when we start recovering again".
1 - I draw your attention again to the fact that the Emergency Unemployment numbers (i.e. those not even counted us unemployed because they've dropped off the far end of conventional benefits) is now at a record number.
2 - The fact that the second derivative of initial claimants is improving does not mean that the figures are getting better.
3 - Jobless figures are considered a lagging indicator. What if, this time, we really ARE headed into a further recession/depression and proper bear market, the jobless figures are now a LEADING indicator.
4 - Up until 2000-ish, the US had been in a bull market for about 50 years (with corrections, e.g. 1987, but basically a bull market). Interest rates from 1990-ish in a long term downward trend.
5 - We now have historic low interest rates (here in the UK, the lowest in the Bank of England's 350-odd year history), and historic levels of money being pumped into a system to keep or return that system at historic high levels (I'm talking of the stock market).
6 - As a 38 year old, you have never experienced a depression. I'm just over 50, neither have I, but I was around in 1987 and remember black Monday. I remember the day the UK left the ERM and the pound fell out of bed. I remember BoE interest rates being 15% (briefly) in the UK
What happens if, bearing in mind the above, that this time it is NOT typical? What about the possibility that this MIGHT be a repeat of Japan or 1930?
I've looked at charts of the Dow, S & P, FTSE and Nikkei going back as far as I can (both on standard and log y-axes), and given my (albeit not purely mathematical) knowledge of exponential growth and distribution curves, there is no reason at all to doubt that we COULD have a fall of a lot more on the stock indices. And that's before even considering the historic fundamentals.
I admire your optimism, but I'd rather know the reality and judge accordingly, than think we're out of the woods and everything is fine when, given my earlier posting, NOTHING has changed since the start of this crisis and, arguably, we're now in a WORSE position because of the pumping to try and get us back to the levels of the last two bubbles.
DavidC
Nicely written David. BTW, in case it isn't obvious looking at the DJIA or the SP500, potential right shoulders are nicely forming on the max time charts for both indices. These potential H&S patterns are absolutely massive (and, at least on the DJIA, the neckline has already been violated). Next 6-24 months it should indeed be very interesting to watch the US equities markets/indices.
well said David.
It is worth noting that the point of maximum skepticism on the job front is typically when we start recovering again. I think we're at that point. It's been a tough 2 years, and I hope the next two years will be much, much better, but I am not fooling myself. It will be a long, tough slug ahead but this doesn't mean jobs are never coming back again. Many won't but new ones will take their place.
Details of the report:
Construction -53,000
Manufacturing -27,000
Service providing -4,000
Retail trade -10,000
Professional and business services +50,000
Education and health services +35,000
Leisure and hospitality -25,000
Government +21,000
Look for a pick-up in manufacturing and construction jobs in the next few months. Census will provide a boost to government, but this is a one-time boost. Retail will gradually improve as overall employment picks up.
The only thing I know is that there a thin line that is moving the money of all the people in one adress. Call it "Da Gang" or whatever.
I must disagree with your optimism regarding employment. Losing jobs during Santa season is horrible news and not encouraging. I believe November numbers were completely cooked based on the temporary hiring factors, the removal of people from the labor force and the crazy birth/death model that consistently makes stuff up. All the data for November did not justify a positive print, sorry, the ISM showed nothing of the sort and the weekly claims were horrible. I also believe all these temporary hires will be let go by the end of Jan., we will see who is right on that one.
You also have to remember that the BLS will be adding some 800K to the unemployment numbers in Feb., due to their BS estimates at the begining of last year. Take a tlook at the CES birth/death model and tell me you think it tells the truth, 200K ppl started businesses in April of 2009 when zero credit was avaibale? Please. I admit the firings are getting better, employment cannot go to zero, but the fact that we are losing jobs at this stage of the game should make us all nervous, period.
The overall economic condition is not good and we all know this. Just because the market goes up does not mean we are recovering, the market is a terrible forward looking indicator. I look at 3Q09 GDP growth of 2.2% after everything the government did to spur growth, that is not good. We might get a 4 or 5% 4Q09 GDP print, but take government spending out and the number is crap, this is not good news. Take a look at the November housing data without government support, they were horrible! To boot, if we can't move housing at 4.6% mortgages and tax credits up the rear we are in trouble.
The economic foundation is on shaky ground to be calling for a V shape of strong recovery. Sure, stocks are going up, on no volume I might add, but that means nothing in regards to actual economic conditions. At the end of the day one of us will be right and I am pretty sure the data points in my direction, a weak or no recovery.
Leo, dude you live in a vacuum. It's best if you get out of that vacuum for a little while and get some fresh air and take-in some reality. Otherwise, that brain damage might just become permanent.
Of course we'll have huge job gains soon. IT'S CALLED the NATIONAL CENSUS, what they're hiring nearly 2 million. Wake up u morons, this whole country is one big scam. Market is Never Going Down Again, until it does, at which point the 666 low will make us all wish we really were in hell.
I think Leo is an imaginary contrarian planted by TD just to draw responses for further analysis by the ZH analysis team. If this is true,then wouldn't you with that all gove dept would have a program like that to imrove functionality?(lol)
I wouldn't much stock in the increase in temp workers last month. I expect most of those were hired by retailers to siphon off the $25 Billion in excess transfer payments that Turbo Timmy provided in Dec.
That said, I'm not an analyst but really don't need to be to predict positive job growth for Jan as it simply won't do to have all 3 of the main jobs/employment metrics that people look at being in the gutter.
1) U3 - spikes between 10.3 & 10.5 percent as many of the 5 million people currently not being counted in the labor market (long term unemployed) will come streaming back in to labor force on the new year and picked up in the Household Survey. I believe this same phenomenon was apparent last Jan as well.
2) The BLS has already braced us for the MONSTER revisions for '09 that will hit the tape this month. As you recall the initial estimates they provided a few months ago for the 1st half of the year were over 800K down
3) Given 1 and 2, job creation will be reported for Jan. By how much is anybody's guess at this point
Leo,
You say December is not a time for hiring then say temp agencies added 46,500 jobs. So which is it?
As a retailer, November and December are times to hire to handle the holiday crunch. I hired one person but have no plans of hiring anyone else in the 2010 and in certain departments if a vacancies appears I will not fill it.
Smart men often have blind spots. This is one of those occasions. This guy is delusional on jobs. he ought to venture out of the gated community or city for a while and actually gauge what's going on out here. It's a lot worse than is being reported and NOT improving.
Listen, I do not live in any gated community. I am 38-years old and have lived with progressive MS for the last 12 years. I know it's very tough out there for millions of workers, most notably disabled and religious minorities.
"He also reminded me that there is a natural upper cap on bond yields. "Remember what we talked about a while back, at 7% or more, pension funds will lock in those rates in a flash, drying up supply."
Tell your bond trader buddy to look at the way the U.S. government dealt with the GM bondholders. That's the way the holders of ALL bonds--public and private--are going to be treated. Oh, I see--"pension plans." These scams are going to be wiped out in short order. Do you really think our Mellonesque liquidators are going to leave our petit bourgeois pensioners alone? That's fuzzy logic.
Also note in the new "regulation" legislation the first step in Federalizing mutual funds. That will turn out to be a "loan" to the Federal government--and you won't be able to touch a cent in those funds.
We are in full Mellonesque liquidationist mode now. Unfortunately, nobody studies liquidation as a process, because unemployment never reached 30% during the Depression. It's truly an "art," of a sort.
But anyway, that's what's going down now. It is now in the lead, having taken over the lead from demand collapse and deflation. The household survey will shoot up to above a million in about 2 or 4 months.
One very good indicator of the "progress" of liquidation is the supply chain. Nobody studies that either. But it is merrily deteriorating rapidly. Usually starts in transpo and moves to agriculture, where it has now begun. Pay more attention to the economy on the ground, not on your idiotic models. Supply chain reports are very reliable--these guys have NO axe to grind. They simply do the work.
Rubin is our Mellon, and a nasty little police state criminal he is, too. Manipulating his goombah puppet, Barry Rezko. (Oh by the way, Tony is still giving testimony on a daily basis--so my contacts tell me who see him going in and out of Fitzy's office).
Cheerio, dahlings.
the Fitzy thing has stayed buried waaaaaaay too long, particularly given Fitzgerald historical efficiency as well as his penchant for camera mugging.
there is something real ugly there and Rahm, Obama, Axelrod and Valerie play into this big time in my view.
Unfortunately, I think you are right about being in a process of liquidation.
As far as protection of ones asseets, what do you
recommend? Out of mutual funds, out of pension plans? What other steps? Can you suggest any books, articles to better understand this liquidation? And thanks for your
comments.
You know what I really suggest above all? Specialized knowledge. Find an area of the economy, study it carefully, keep your ear to the ground, and invest accordingly. The Federal Government is about to move on two big sources of cash because it's about to do another bailout (as I have said several times: February, about $2.8 trillion). These are 401K plans, mutual funds. These are huge pots of cash just sitting there. It has to be present in a way which would do credit to Goebbels. But it will be done, because American homeowners will believe ANYTHING and do ANYTHING rather than admit that in rather short order they are going to be sitting outside their crackerbox palaces. Employment ON THE GROUND is collapsing. And a big-paying source is just about to make heads roll: state and local government employers. These jobs have been strategically placed for decades in order to smooth out the system.
Indeed, we haven't had an economy for decades. We've had "smoothing." But the consensus on that is gone--really, because we've produced a generation of suburbanites so ignorant that they don't really know what it is. Empires fall when they lose an awareness of themselves. Ours is gone, and there is no way to get it back.
So specialize: vacation real estate, coins, hedging--whatever. Just make sure you have a specializedk knowledge of what it is before you invest.
"consumer spending should remain supported by the continued growth in the economy-wide wage bill"
Everything I see (e.g., tax receipts) says the exact opposite. Ditto for rising wages. Where are the rising wages???
Where are the rising wages?
Look to Wall Street....
I've been around the business for 35 years,good traders understand today's market and a few can position effectively for tomorrow's but virtually none are much good at looking forward in a global environment for which they have no experiential reference.
If they're so fucking prescient about economics and timing they'd be trading their own money for a few weeks or months and then sailing around the world while their gazillions earned easy returns.
I realize why I didn't win the lotto last night, just picked three wrong numbers but I was close. Jobs? Who's hiring? The new normal looks pretty grim and if it weren't for record unemployment payouts, record food stamp distribution, record meddling in the auto, banking, housing industries....there'd be fucking bread lines around every other corner.
This house of cards cannot withstand any strong winds, that's for damned sure.
Leo,
I'm inclined to agree with the more negative responses.
There is NOTHING that has been changed since the (so-called) credit crunch hit.
The bank (lack of) stress tests did not even, in their worst case scenarios, model even the official figures we have now (let alone the U-6 or Emergency claimant numbers), and banks have been allowed to mark to fiction their 'toxic' assets (or extend and pretend).
We have all-time historic low interest rates, all-time high pumping of currency into the system, which is doing NOTHING but allow banks to retain VaRs at pre-crisis levels and gamble with money borrowed at virtually zero percent. The banks and authorities have learned NOTHING (converting from an investment bank to commercial bank in 24 hours? No problem).
This is NOT a recipe for an organic recovery, let alone the fact that the two previous peaks in the US stock market were the result of bubbles (dotcom and housing). To get back to those levels is NOT a return to 'normalcy' (I'm English and I prefer the use of the word normality).
I'm not naive enough to believe it would ever happen, but what should have occurred is to have let the Too Big To Fails fall and then sell the toxic assets at market value to those more prudent banks who didn't mess up in such a spectacular manner.
Recovery? No. Bear market rally? My feelings are more in that area.
DavidC
you mentioned the banks.
the USA banking system has serious solvency issues, particularly the blessed group of 19, some worse than others. NOTHING has changed with the USA banking system since before the lehman collapse, with the major exception of a negative, that being the congressional forced modification of FASB 157, which legitimized fraudulent accounting. The recent FDIC actions on capital treatment for FASB 166/167 implementation is further proof that fraudulent accounting is approved by US banking regulators.
the US economy cannot recover and grow without a healthy banking system and it is currently STILL in the intensive care unit.
Leo, I would love to see you make the bullish case for the USA in light of the above.
Leo,
Don't give up your day job.
Consider where the growth is though:
True, there is some growth, but there are serious "sticky wages" issues. To see serious job recovery. (And consider how MUCH we really need), wages must fall and for a variety of reasons, they haven't, not really. (Sticky wages being a economic theiry BTW, not just a comment).
This is only part of the equation and likely mostly stimulus driven.
If we can't kickstart credit creation somehow, we're deadmeat and I agree with Buiter as to why the USA dollar will be toast is 2-5 years. (See his article at the FT).
We need to do more than celebrate "less losses" or "tiny gains" .
Thanks though.
There is no recovery, I practice foreclosure defense
and bankruptcy law. It is actually getting worse. If
you remove the government stimulus, the system would collapse.
There are many people, especially on Wall Street and the Fed Govt
who live in another world. For those of us who live in the real world,
we know that there is no recovery. It is all lies.
+1
Mr Leo sir, all those "numbers" you refer to come from the gov. i.e. BOGUS
The real number is in the shadow stats, and that is showing DEPRESSION. There will be hiring, but only census workers, now it is your own problem if you call them "jobs".
Bogus or not, big money trades off those numbers, so while you dismiss them, I prefer to analyze them.
Yes, they do trade off those numbers... It's called "distribution".
dnarby....best line I've seen this weekend.
Nicely done.
Just who IS that last marginal buyer?
you're naive mr Leo....retail money trades off those numbers, big money trades off numbers you and I can't have access to. now I am sure you're some 20yo wannabe trader, but even so it's great to have a laugh oce in a while in the midst of the ongoing economic plight.
So big money trades off another set of numbers. Thanks for the insight sport. -:
Have you ever heard of the concept of information asymmetry? Do you really think those big money (should be interesting to know what do you really mean by big money) use the same information as your average retail investor when they jump into and out of asset classes? Come on, your hilarious. Do you live in Utopia?
Leo,
You can look up these long term established trends in many places:
September through December is the very peak season of jobs and temporary jobs...has been since WWII. Why? All the harvest jobs and all the pick pack ship, fork lift, warehouse and retail jobs of the Holiday Season.
In the first quarter the following happens:
A) Construction is not heavy, harvest is over, retail buying is over.
B) Large and medium sized companies wait and see if their quote systems and sales prospects indicate that they will be on budget for the year before they begins hiring. Whats more many people leave after they get their bonuses and they may not be replaced.
Since we know that cap ex budgets for 2010 are very low and we know that corproate cash as a percent of assets and debt is very low right now....we can expect the normal conservatism about new hiring to be even more pronounced in this first quarter.
Further, since clothes are at a low level of purchase until late spring and then back to school and once inventory returns are completed in January, retailers have their lowest and hardest months from now until Memorial Day. They often cut full time employees and temp employees in droves at this time.
Further, we know that auto production and sales are traditionally seasonally low at this time of year
Further, we know that the particular survey on Manufacturing cited is compiled from the companies who returned the survey...not all the companies asked to fill out the survey.
Lastly, we do know that snow storms increases temp workers who can shovel, but decreases retail.
And we do know that there will be a big increase in census workers this year.
Ever since I saw your forecasts about jobs, I looked around harder for confirmation of the thesis, but I cannot find any. In fact, I found confirmation that the opposite direction is more likley.
Sorry, I wish it was as you predict, I just cannot find the basis for such a prediction. Now I can see how the BLS assumption methodology can be over stated in 2010 just as it was by 824,000 jobs in 2009, but I cannot see a logical business case for ever higher levels of hiring at this time.
Take care
Damn, that was good.
+1
+1
Well said, accurate.
It remains the case that, apart from a huge number of part time Census jobs that seem suspiciously makework, there is no driver for employment right now and a lot of reasons, from the "health care" tax bill to the Cap and trade tax bill, to various other tax bills, to reduce employee count and fill in as necessary with contract labor. After all, existing employees can always work harder and longer.
from the BLS report you (indirectly) reference, a question:
Not in labor force.. (seasonally adjusted) (000's)
2009/Nov. 83,022
2009/Dec. 83,865
(of interest the 2008/Dec. seasonally adjusted number was 80,448)
Where did the 3/4 of a million seasonally adjusted persons who vanished from the labor force between November 2009 and December 2009 go? I don't dare ask what became of the 3.5 million missing persons between December 2009 and December 2008.
http://www.bls.gov/news.release/empsit.t01.htm
I am not a labor economist but is it possible that many of those that dropped out of the labor force were temporary workers with visas? I heard of anecdotal reports of this but I am asking to confirm.