Goldman's NFP Postmortem

Tyler Durden's picture

The fact-digging continues, this time out out of Goldman, which has some less than stellar words about what the superficial consensus says was a strong number. Then again, Goldman's agenda is pure goldilocks: an economy that is not too strong and just right for another $2 trillion of QEternity at a minimum. Remember: if jobs were to really surge someone might ask Bernanke if when he will stop his $85 billion/month flow program aka QE3.

From Goldman Sachs

Jobless rate falls below 8% as job gains differ sharply between two surveys

BOTTOM LINE: In an encouraging labor market report, the official US unemployment rate fell 0.3 points to 7.8% as the survey of households uncovered more than 800,000 new jobs in September, 187,000 of which were due to gains in government employment. While last month’s job gains in the payroll survey were much more moderate (114,000), they accompanied increases in the workweek and came atop significant revisions in government employment. Our preliminary read for the September CAI is 2.4%.

KEY NUMBERS:

Nonfarm payrolls +114k for September vs GS +100k, median forecast +115k.
Unemployment rate 7.8% for September vs GS 8.1%, median forecast 8.2%.
Average hourly earnings +0.3% (mom) for September vs GS +0.1%, median forecast +0.2%.

MAIN POINTS:

1. The most eye-catching part of this report is the 0.3-point drop in the unemployment rate, to 7.8%. For the most part, this looks like a genuine move, as it comes alongside large increases in both the labor force (+418,000) and the tally of jobs in the survey of households (+873,000) of which 187,000 was due to government. (Note: The claim that the household employment gain was entirely due to government hiring is incorrect. We confirmed with the BLS that the seasonally-adjusted gain in government employment was 187,000.) In both cases, the labor force and the level of employment followed setbacks in both July and August, so it may be better to look at 3-month totals. On that basis, household employment is up 559,000 while the labor force is still down 100,000. One anomaly in the household data is that the U-6 measure of underemployment remained at the 14.7% level reported for August; this is due to a large increase in the number of workers working part time for economic reasons. For this reason, we have applied a 1-point downward adjustment to the MAP reading for unemployment.

2. In the usually more reliable payroll survey, the job count for September was 114,000 higher than for August, which itself was revised up by 86,000 for a round total of 200,000 new jobs in this survey. However, the upward revisions were more than accounted for by mark-ups in government jobs in both July and August. Across major sectors of the economy, the pattern of job gains in September was similar to the August pattern—continuing strength in education (+49,000 in September, somewhat surprising given the large gains of the prior two months), little net change in temporary workers (down 2,000 in September following no change in August), and another setback in manufacturing (-16,000).

3. Other elements of the payroll survey were firmer. In particular, workweeks lengthened 0.1 hour in both manufacturing and the overall private economy. As a result, the index of hours worked—a rough proxy for GDP less productivity gains—rose a sturdy 0.4% in September. Average hourly earnings also rose 0.3% in September. So the report suggests at least moderate gains in wage and salary income and in industrial output despite the job loss in that sector. We would also note that the gain in household employment, when adjusted to match the definitions used in the payroll survey, was a sturdy 294,000. For these reasons, we have applied an upward adjustment of 1 point to the MAP reading for payrolls.