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The Complete "Distorted Jobs Report" Preview

Tyler Durden's picture




 

What the sell-side expects:

  • JP Morgan 75K
  • Goldman Sachs 100K
  • UBS 100K
  • Bank of America 110K
  • HSBC 120K
  • Barclays 125K
  • Citigroup 130K
  • Deutsche Bank 130K

What the market expects vis RanSquawk:

Today sees the release of the US nonfarm payrolls and unemployment rate reading for the month of October, during much of which, hundreds of thousands of federal workers were furloughed due to the recent sixteen day government shutdown.

Ahead of the release, it is important to note that those furloughed federal workers are still counted as employed for the purpose of the headline nonfarm payroll reading, given that they received back-pay. However, the unemployment rate is calculated using a survey of households, in which those workers are categorized as unemployed. It is also possible that there may be confusion among furloughed workers over their own employment statuses, which could distort the unemployment figure.

As well as the shutdown’s effect on the collection of data, the Congressional dysfunction is also likely to have dampened investor sentiment during the month of October. This may have had a negative impact on the labour market, and thus affect the payrolls reading.

In terms of other data points, this year’s trend of nonfarm payroll readings has followed a downward path. The delayed September reading, released just two weeks ago, was no different, coming in at 148k versus an expected 180k and last week’s ADP employment change reading followed suit at 130k versus an expected 150k. Yesterday’s expectation-beating third-quarter GDP reading (2.8% vs. Exp. 2.0% Prev. 2.5%) will have been of a too wide date range to account for the shutdown.

 

And then, here is Bank of America why today's report will be largely meaningless.

The government shutdown means a relatively complicated, soft employment report. We look for a payroll employment gain of just 110,000 for both total and private employment. We also expect a sharp, one-time jump in the unemployment rate to 7.4% in October from 7.2% in September, although it could be higher. An increase in October is likely to disappear in the November report.

This report will be distorted in several ways. First, the establishment and household surveys have different ways of classifying workers. In the establishment report, employees are counted as on payroll if they receive pay during the survey week. Furloughed government workers were awarded back-pay during the shutdown, satisfying this definition of employed. Conversely, the household survey classifies furloughed workers as on "temporary layoff," which means they are recorded as unemployed. Note that the same would be true for a private sector paid furlough. The upshot, however, is that the same federal government employee would be both employed in the establishment survey and unemployed in the household survey. Those exact numbers are unclear, but the jump in unemployment could be anywhere from 250,000 (a 7.4% unemployment rate) to 500,000 (a 7.6% unemployment rate).

The unemployment numbers could be distorted for another reason: data collection began one week later than intended (October 20 instead of 13), but households are asked to report on their employment situation from the original survey week. The BLS has highlighted that "non-sampling error" - basically, people answering the survey incorrectly - could be much higher this month. That would be in additional to the usual sampling error that comes from taking a survey in the first place. According to the BLS, that error is typically plus or minus 90,000 for the monthly change in payroll employment, and plus or minus 0.2% for the unemployment rate. All told, we have much less confidence in these numbers than usual. 

These data challenges also complicate other aspects of the report. The BLS has noted that federal employees who worked fewer than 35 hours during the survey week may be counted as part-time for economic reasons, even though their positions remain full time. On the other hand, the establishment survey estimate of average weekly hours is based only on the private sector. While we see some downside risk to private hours during the shutdown and its aftermath, we expect those to remain steady at 34.5 hours. Similarly, we look for average hourly earnings to grow 0.2% in October, faster than the 0.1% increase in September but in line with the average over the past six months. We won't know until we see the November employment data whether these various distortions are one-off effects or whether the fiscal drama in October had more persistent effects.

 

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Fri, 11/08/2013 - 09:17 | 4134625 1835jackson
1835jackson's picture

So i'd expect 200k double what GS says.

Fri, 11/08/2013 - 09:23 | 4134638 GetZeeGold
GetZeeGold's picture

 

 

Are we taking full or part time jobs here? Hopefully we'll get a breakdown included with the report.

 

Obamajobs.....29.5 hours a week and free Medicare....good luck finding a doctor.

Fri, 11/08/2013 - 09:33 | 4134684 Bobbyrib
Bobbyrib's picture

Well played good sir. You were correct. The Bureau of Lies and bullShit came up with 204K.

Fri, 11/08/2013 - 09:48 | 4134793 DC3
DC3's picture

You nailed it!

Fri, 11/08/2013 - 09:18 | 4134629 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

And the winner is........

drum roll

Fri, 11/08/2013 - 09:19 | 4134634 remain calm
remain calm's picture

85 billion/mo is the distortion. Everything else is BS.

Fri, 11/08/2013 - 09:28 | 4134666 GMadScientist
GMadScientist's picture

Here's the most deeply fucked part: that QE may be the current difference between no jobs growth and even steeper UE today. As BS as the numbers are (compared to say ShadowStats) and as horrible as the job market is...it will still get much worse when the distortion ends.

 

Fri, 11/08/2013 - 09:35 | 4134687 Oldwood
Oldwood's picture

Its like climbing a tree to ecape a fire. As the flames climb behind, the risk of jumping becomes ever greater all while our asses catch fire. We are all trapped. We see the folly of the choices made and even those who saw it as a mistake have been climbing the burning tree right beside the true believers. 

Fri, 11/08/2013 - 09:24 | 4134648 Oldwood
Oldwood's picture

We are as healthy, wealthy and happy as they tell us we are. We are mentally being absorbed into the collective. Resistance is futile and its bumming out people. Smile...be happy!

Fri, 11/08/2013 - 09:27 | 4134658 GetZeeGold
GetZeeGold's picture

 

 

We are Borg......bitchez!

Fri, 11/08/2013 - 09:28 | 4134667 Oldwood
Oldwood's picture

O'Borgs!

Fri, 11/08/2013 - 10:04 | 4134896 No Euros please...
No Euros please we're British's picture

Iceborgs. Steady as she goes aboard the USS Titanic.

Fri, 11/08/2013 - 09:29 | 4134669 GMadScientist
GMadScientist's picture

"Stand in the place where you live..."

Fri, 11/08/2013 - 09:26 | 4134657 youngman
youngman's picture

Its more important is that who gets the number before everyone else.....those seconds are money and a house in the Hamptons....easy money if you can cheat...gold is making a move already...

 

Fri, 11/08/2013 - 09:27 | 4134660 RobM1981
RobM1981's picture

Can Zero Hedge start posting the Employment statistics, instead of just U?  We all know the problems with U, and we all know how this Administration hides behind them.

 

Let's face it: when everyone stops looking for work we get Zero percent unemployment, right?  I'm half wondering if that's what Barack Obama wants - if he even understands how numbers work.

 

Unemployment is sad, but the Employment rate is where the real terror is.  There are fewer Americans working now than when BO was elected - and they're making less money, and working fewer hours, too.  That's the catastrophe the Unemployment doesn't reflect.

Fri, 11/08/2013 - 09:30 | 4134674 GMadScientist
GMadScientist's picture

I don't give a fuck about seats in chairs or how hard they're trying to find a job.

I care very deeply about aggregate demand and money velocity.

Fri, 11/08/2013 - 09:30 | 4134675 youngman
youngman's picture

This number really does not matter anymore...its wether we are 49% on the dole or over 50% now...that is what matters now...can the producers ever win again..probably not....so down it goes..got gold

Fri, 11/08/2013 - 09:31 | 4134679 thismarketisrigged
thismarketisrigged's picture

210,000, laugh out fucking loud, this shit is so fucking funny, ha ha. 

 

ya 210,000 my fucking ass.

 

more like 210 jobs.

 

fucking jokes.

Fri, 11/08/2013 - 09:34 | 4134697 GetZeeGold
GetZeeGold's picture

 

 

If your gonna go.......GO BIG!

Fri, 11/08/2013 - 09:32 | 4134681 youngman
youngman's picture

What a number?????? WTF

Fri, 11/08/2013 - 09:34 | 4134695 Bosch
Bosch's picture

So in the midst of the Obamacare debacle & focus....look squirrel....everyone is going to act surprised we get a major beat?  

 

Fuck this. 

Fri, 11/08/2013 - 09:38 | 4134724 polo007
polo007's picture

http://www.reuters.com/article/2013/11/05/column-markets-saft-idUSL2N0IP1QW20131105

The QE deflation puzzle

Tue Nov 5, 2013 3:00pm EST

By James Saft

Nov 5 (Reuters) - When it comes to creating inflation, bond buying by central banks may actually ultimately be counterproductive.

Called quantitative easing, it continues to be a mainstay of the policy reaction to the ongoing economic malaise. Yet here we are five years later and the evidence that QE can kindle inflation, much less revive the economy, is decidedly mixed.

In part that may be because everyone realizes that QE isn't forever: ultimately the bonds the bank buys will have to be repaid. It is also true - and here we can consider the remarkable valuations of Twitter and Pinterest - that QE causes bad investments, which ultimately must be deflationary.

With U.S. inflation rising just 1.2 percent year on year in September, well below the Fed's 2.0 percent target, bond buying by the Federal Reserve will continue - a bit like the old joke about beatings carrying on until morale improves.

Very radical increases in bond buying in Japan under Abenomics - more or less a pledge to buy and buy assets until inflation reaches 2 percent - has also had only mixed success so far, with core inflation flat in the year to September. That this, the first time Japan core inflation hasn't fallen outright since the end of 2008, is seen as a victory is itself a bit of an indictment of extraordinary monetary policy.

Dangerously falling inflation in the euro zone has prompted calls for the ECB to join in the bond buying, despite its signal lack of success elsewhere. The ECB is arguably already engaging in QE as its program of providing long-term financing to banks often leads to banks buying government bonds themselves.

So, QE everywhere, and everywhere unsatisfactory inflation and at least the threat of falling prices. Could there be a relationship? Part of the failure of QE may be explained by the fact that as a percent of broader money supply the amounts involved are small. Banks must lend and businesses invest or QE will be swamped.

In some ways, all of the inflationary effects of QE are short-lasting and liable to reversed. Not only is everyone involved aware that ultimately the bonds are not being bought and burned, but bought and held, and thus must be repaid or will be sold by central banks.

Also, QE encourages private investors to gamble a bit, perhaps leading to poor choices.

"Unproductive investment is by nature ultimately deflationary," Michaela Marcussen, global head of economics at Societe Generale, wrote in a note to clients. "This is a point also worth recalling when investing in paper assets fueled by QE liquidity and not underpinned by sustainable economic growth."

Fri, 11/08/2013 - 09:41 | 4134745 CPL
CPL's picture

Also, QE encourages private investors to gamble an entire world economy, perhaps leading to poor choices over 100 years.

There we go.  Fixed.

Fri, 11/08/2013 - 11:54 | 4135385 no more banksters
no more banksters's picture

Why banksters laugh with the recent ECOFIN decision

http://failedevolution.blogspot.gr/2013/07/why-banksters-laugh-with-rece...

Do NOT follow this link or you will be banned from the site!