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Two Takes On The NFP Number, Neither One Good
Two takes on the NFP number: first from Knight Capital, and second from most recent entrant in the ridiculous propaganda drama queen race, Goldman Sachs, which is most gladly selling ES as its customers are buying with visions of S&P 1,500 as per David Kostin's latest chartmongery.
From Brian Yelvington at Knight:
The headline provided a significant disappointment compared to the slew of expectations and whispers following the enormous ADP print on Wednesday. Prior to that adjustment, these numbers would have looked favorable when the prior revisions to NFP and Private Payrolls are taken into account. With the huge expectations factored in, NFP looks better, but private payrolls is still a miss. Our read is that these numbers, if reconfirmed in February for January data, point to the jobs situation being barely within the range of the “steady state” necessary to keep the unemployment rate from moving. Recall we need 150K-200K new jobs each month to keep the rate from creeping up. The birth/death adjustment added 24K to the jobs rolls according to the model. The birth/death adjustments will be adjusted quarterly instead of annually beginning with the February report.
The rate itself declined to 9.4% from a prior 9.8%, driven largely by participation rates that showed negative trends (and associated benchmark revisions). The employment ratio rose to 58.3% from 58.2% and the average duration of unemployment rose to 34.2 weeks from 33.9 weeks. However, 556K people dropped off of the unemployment rolls and the pool of available labor dropped by 333K as the participation rate declined to 64.3% (down 0.02%). This appears pretty large on a seasonal basis, and we will examine the numbers in January very closely to see whether or not the drop in participation is an idiosyncratic issue or evidence of continued discouragement and persistent discouragement on the part of workers. The underemployment index dropped to 16.7% down from 17%, a positive sign.
Bonds mostly rallied on the news while equities dropped. Policy rates and inflation expectations are a potential flood that is being held back by a lackluster jobs market. The assumption is that the Fed will turn hawkish (and apparently admit to inflation pressures or succumb to bubble fears) if jobs data are bullish. We still believe the Fed is likely to let things run for a while on policy rates given the difficulties in trying to revisit stimulus if the exit is too early. Equities are a bit more of a mystery. While growth is good and points to a more robust economy, the specter of global issues remains as does the impact of QE withdrawal. If one accepts that equities rally on QE, should they not sell off on its withdrawal? The Fed walks this tightrope and easy policy rates are its balance beam as it noted with its references to the communications problems outlined in the recent minutes. Bernanke’s upcoming testimony should be the next significant data point for the markets.
And next, from Jan Hatzius:
MAIN POINTS:
1. Nonfarm payrolls rose only modestly in December, in line with our expectations but weaker than the median forecast. Upward revisions totaling 70k offset some of this disappointment, as the surprisingly soft November figure was taken up 32k to +71k. The composition of the December increase remains concentrated in sectors that have been the mainstay of gains during this recovery-education and health (+44k), leisure and hospitality (+47k), and temporary help (+16). Government payrolls fell only 10k, less than generally expected, as the federal government covered half of a 20k loss at the state and local level.2. The report suggests only modest gains in manufacturing output, as payroll increases in this sector amounted to only 10k while the factory workweek edged down 0.1 hour to 40.2 hours (overtime was unchanged). In the broader economy, the workweek was stable and the index of total hours worked rose only 0.1%.
3. The survey of households likewise had mixed results, with employment gains on the stronger side - 297k on the headline figure and 321k when adjusted to match the concepts and definitions underlying the payroll count. However, this accounted for only about half of the 0.4-point drop reported for the unemployment rate, as the labor force fell by a similar 260k. The weakness in the labor force has been persistent enough to suggest that at least part of it - perhaps a large part - is fundamental in nature. That said, it remains a source of some puzzlement and surprise, the unwinding of which could put a floor on how quickly the jobless rate falls in coming months. As noted above, we have applied a 1-point judgmental adjustment to the US-MAP reading on unemployment to reflect this less-than-strong composition.
4. Average hourly earnings rose only 0.1% in December. In combination with the modest increase in payrolls and the flatness in the workweek, this implies only a tiny increase in wage and salary income for the month. On a year-to-year basis, the wage trend is only +1.8%, a bit more than in November given that the wage figure was down slightly in December 2009, but weak in historical context.
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REITs come out of the gate swinging! Evidently, jobless people are the key to a revival in CRE.
My god...are they really going to jack it today? Seriously?
Hey HarryWanger, do you have a counter argument that would improve the manufacturing data to put it in line with your "strong manufacturing recovery" statement??
Harry isn't in just yet, went out to the job site to shut down construction on the mall he's building
It is not in Wangers makeup to actually build something. Leeches are not producers or builders - and incidentally they are hermaphrodites which bodes ill for us all that something like a HW can multiply independently.
True. But the good new is you can tell them to go Fu*k themselves
"The birth/death adjustments will be adjusted quarterly instead of annually beginning with the February report."
Obviously this will lead to more accurate data we can all agree on.
And on that, I agree. But why stop there? Why not adjust the numbers every week, or daily, or hourly, as required, to support whatever political lie needs supporting? Only a few people will understand what's really going on, and they won't be listened to or heard above the Noise Machine.
if author is an idiot.. well it's surprise
#That said, it remains a source of some puzzlement and #surprise,
why surpise..
housing -dead . check multi decades low
auto - dead ,, 12 mln per year agasint 16-17 couple years ago
manufactoring - dead , no cell phones/ computer/etc being made
fed gov- dead 1.7 trln $ deficit
local gov -dead...california/ny/new jersey/ arizona/etc are bankrupt
what left ? leasure/ hospital/education services
alx
Hehe. Right! That explains the deflation side of "biflation" in the US economy. Yet there's an inflation side that we all know about at the same time. That's poison, man!
Does zerohedge factor into the Civilian Labour force the number of baby boomers that are now retiring in large numbers? Does that affect the participation rate?
Baby boomers may be retiring but they aren't leaving the labor force. They're now working at McDonald's.
At least the service is better when Grandma is taking orders and slinging shakes.
RSI on the SPX goes to infinity. This thing should be sold quickly...
Your shorts are getting blown out .... And the miners off' like pong.
Ummmm...no...only ONE of my shorts is under water, currently. Also, my anxiety position is being naked shorted into oblivion at this time...as usual.
However, you will eat these words you have written...as the totally depraved and morally bankrupt USD is about to have its way with the entire planet.
Sell highly crowded long trades...and quickly...
The dollar up all year. Dollar denominated debt alwaaaaaaaaays keeps a bid under the dollar. The slow downfall of the euro will also help and GDP 4.0 ..
Uncle ben is cold pimp'n
Whatever, its all good for stocks.
Ummmm....that is last year's good idea.
This is a new year? Musta missed somethin'.
"Whatever, its all good for stocks."
Agreed.
Looking at CAT and AAPL; can anything hurt these two? The world is a big place and doesn't much care that the uneducated and unskilled in the US can't get a job.
Really, in terms of the market, who needs them?
Apple pinned at highs.
PCLN now at another lifetime, record high.
Must be looking "past" the bad jobs number.
LOL.....
Pull 'em up..
O. M. G.
ditto that
ditto,,ditto..
Robo I'd imagine that roughly 90% of the ZH community disagrees with most of your posts but really , as long as you keep posting stuff like the above your presence is A-okay with me .
And roughly 90% of the ZH community has been wrong.
Robo has consistently pointed out that the market is performing quite well, only to be junked and ridiculed as everything he has said came to fruition.
Keep it up Robo; this place needs a voice of sanity.
Except that RoboTrader's constant predictions of the collapse of the gold/silver market over the past couple of years have been constantly wrong, so everything he has said has not come to fruition.
Like it or not, Robo's been in tune w the mo-mo market.
Must stop looking. Must turn away now. Must.. Ztttt, Ztttt. Damit, brain fuze popped again.
Sure beats looking at Benny crapping bills. Now if I could just move on to the next post.
I can't stop watching, please make it stop!
Come on man ! I can see the saline solution sloshing around in that junk !
Au naturel -- firm handfuls. No leaks.
The cherry on the top of the cake today came from Barclays. They had pencilled in a nfp figure of roughly 500k and after the report their comment was: "This is a good number despite the lofty expectations." It doesn't get more retarded than this.
..."It doesn't get more retarded than this."
Just wait...
The most interest reaction in the markets is the bond market.
Weak number and it keeps selling down. Looks like the bond market will continue to fail until it causes an accident somewhere in the financial structure.
but the market goes up
while the statistical distortionists continue to manipulate and spin their dubious metrics, the patient undeniably remains comatose and on artificial life support. the massive transfusions and medicaments can only prolong the inevitable demise. While the anxious relations pace the halls of the waiting room investing their waning hopes into each inevitably futile mechanism of resuscitation the exponential costs drain their sustenance only to the profit of the attending "physicians".
+1 Metaphor. Beginning to end.
A new avatar for me in light of the latest labor participation rate.
+1
Remain calm, all is well
http://www.youtube.com/watch?v=zDAmPIq29ro
I agree with the general perception of the economy by most of the ZH readers. The economy is crumbling and being hollowed out by the policies in place.
I'm doing what I can to prepare for a long depression. Pool cash, invest in physical PM, diversify out of stocks.
My question is what are most of you doing? Is there a real estate play that is smart to collect some income? Maybe a duplex?
How do you guys plan to out-run the decline in purchasing power or decline in earning power we're all sure to continue to experience?
Buying and renting out a duplex would imply that you are dependent on your tenant to make his/her monthly payment. If they lose their jobs, they may be inclined to do what subprime borrowers have been doing - just stop paying the rent and camp out for a few months/years. I think a better plan would be to make yourself as self-sufficient as possible, dependent on as few people as possible to provide the basic neccessities for yourself and your family.
Gold and other tangible assets that can't be created by a keystroke entry on a Fed/TBTF computer.
What the first article tells me is that the Feb. employment numbers will be terrible due to the quarterly adjustment in the birth/death model figures. The adjustments are always 6-figure negative values.
David Rosenberg says the NFP numbers were much better than they looked: http://www.businessinsider.com/amazingly-david-rosenberg-says-the-jobs-r...
http://www.gallup.com/poll/145478/Gallup-Finds-Unemployment-December.aspx
Gallup says 9.6%