decent job gains in dec, revisions upward in oct and nov, largest income growth in 8 months. economy seems to be weathering the housing weaknesses ok so far. further fuel that consumers can keep the party going.
This job number was probably the worst outcome for the bulls. Stock market has been going up because they were hoping for the Fed to start cutting rates. Strong number has the Fed fighting inflation that does NOT exist.
Since the job numbers are a lagging indicator, the Fed will only cut after we are already in a recession and the cuts will come too late to save the economy.
There are seasonally adjusted data, so holiday hiring should be accommodated, to the extent that it is similar to holiday hiring in recent years. In non-seasonally adjusted data, December is typically a net layoff month, rather than a hiring month.
There are lots of signs of a tighter labor market. The hiring diffusion indices were higher in Q4 than in Q3. Aggregate hours rose twice as fast in Q4 as Q3 (bad for productivity, all else equal). Both suggest hiring may hold up into Q1, though retail adjustments are tricky around the turn of the year.
I wish spencer would show up. He has made the point in the past that a slowdown in productivity growth (which may have continued into Q4) often leads a slowdown in growth. It would be nice to know the extent of slowdown that we might expect, based on this relationship.
I've been a bear for the last couple of years, but I'm beginning to doubt my convictions. But I also realize when the last bear turns to a bull, that's when things collapse.
Workers' average hourly earnings rose 8 cents, or 0.5 percent, the most since April, after rising 0.3 percent the previous month. Economists expected a 0.3 percent increase in hourly wages. Earnings were up 4.2 percent from December 2005, a gain last exceeded in November 2000.
I don't know what to make of the rise in wages. How does this compare to November 2000?
You can argue that point, but why with clothing? Retailers have everything on sale and can't give it away.
My point was that the Fed SHOULD be cutting rates right now. The stock market wants rate cuts. There is weakness in the economy(Credit bubble, housing bubble, copper and commodity prices falling, etc) but the Fed won't act until the numbers confirm the recession, or extremely hard landing. They are always late to the party.
Fed cutting rates is the only thing that can save SOME of the people who are over their heads in mortgage debt. What that would do to the Dollar, is another question.
Yes, but lower crude prices are a counter-inflationary indicator. I view this as a very good employment report. Yes, it shows the housing-related weaknesses, but it also shows that we are starting to deal with this employment trend from a relatively favorable stance.
I do worry about the absorption of the displaced workers, though. They're not going to be picked up much in manufacturing, and I doubt most of them will find great success in the restaurant industry.
Business and professional services aren't going to give these people new jobs.
Fair enough RM -- I just don't buy the argument that the housing situation can be rescued at this point by lower FF rates. Mortgage interest rates are already extremely low by historical standards. The problem is rather that too many people have too little equity in their home and have overextended themselves.
I don't believe there is any easy way out of this situation other than a gradual lowering of home prices to levels that meet a common sense test of affordability.
Oil is correcting because its growth in the first place was speculative and unsustainable. I mean $78/barrel oil prices, cmon now.
Winter is much warmer than expected, stockpiles are forming in inventory reports, and OPEC cant enforce prod cuts, the correction seems warranted.
This jobs report proves the surge in equities over the past 5-6 months, last I checked the stock markets are a leading indicator of economic strength and a surging market means good data to come; and now its coming.
Why would the fed cut rates now with still inflation pressures? Core PCE is still above comfort zone, PPI has been above estimates, commodities prices are still very high, although some precious metals are correcting, we still have potential issues w/ inflation that the fed cannot discount.
No way they cut rates, especially with this jobs data that came out today! Stocks should give up some gains as the hope for fed cuts until at least later in the year are becoming more realistic.
Plus housing is NOT as bad as people were expecting. I worry that future weaker jobs data and tightening lending standards might be the 2nd wind tothe housing cooldown later in the year.
I agree with your analysis of the oil price. But considering the stock market to be a leading indicator can be a spectacularly bad idea, especially for an investor...
Sorry, CR, but I don't see any "solid" about this report. Employment in goods-producing industries continues to lose ground, and the big gainers in the service sector continue to be health care (bed pans), leisure (burger-flipping) and government (only God knows what they do).
I've been a bear for the last couple of years, but I'm beginning to doubt my convictions. But I also realize when the last bear turns to a bull, that's when things collapse.
Me too - but I'm not going 'bullish' until I see evidence the average American's debt load relative to income is declining.
And I'm not as impressed with the bull argument that assets to debts should be the key metric because asset values fluctuate a lot more than most people's incomes... ultimately it is 'income' that most people eat from.
So while this report is VERY good news (it is impossible to pay down debt & save without income or earnings) I am not ready to go completely ga-ga until I see the debt picture improve.
This job number was probably the worst outcome for the bulls. Stock market has been going up because they were hoping for the Fed to start cutting rates.
I disagree - I think there is PLENTY of liquidity out there worldwide to support the markets without the Fed throwing more gasoline on the fire.
The liquidity isn't showing up in 'price inflation' rather in 'asset bubbles'. Time to strangle that beast if they can.
Sorry, CR, but I don't see any "solid" about this report. Employment in goods-producing industries continues to lose ground, and the big gainers in the service sector continue to be health care (bed pans), leisure (burger-flipping) and government (only God knows what they do).
I agree - which is yet one more reason why the Fed shouldn't cut... when rates are really low or really high... that is when the financial markets can really game the system and discourage 'productive activities'.
And since people eat food, drive cars, etc., and don't eat or drive paper... it's a good idea to motivate somebody to grow food, make cars, etc.
And expecting foreigners to do all our dirty work while we send them nothing but paper is 'unsustainable' at best. Somewhere in there we have to increase the amount of 'goods & services' we provide in exchange.
That is most likely to occur when the interest rate approximates the 'neutral rate'... neither excessively stimulating nor excessively dampening. I think they are pretty close - at least for the conditions we have now. If global liquidity goes bye-bye then all that changes.
A neutral rate won't fix currency manipulation but at least it takes care of our own liquidity generation. One key piece of the puzzle.
Dryfly's liquidity argument makes sense. If you look at stock buybacks, you have to be a bit suspicious of the simple "stocks respond to improved economic prospects" argument that takes stocks as a leading indicator. S&P500 firms are refinancing, retiring debt and retiring stock at a very rapid clip. All of that looks good for earnings per share, without saying anything about the core business. The numerator is going up due to reduced financing costs. The denominator is going up due to reduced shares outstanding. More units produced is another matter. This looks like a liquidity-dominated stock market.
That said, there is room out there for lots of opinions. Money markets were pricing in higher odds of an ease, and earlier easing, in December than now.
Sorry, CR, but I don't see any "solid" about this report. Employment in goods-producing industries continues to lose ground, and the big gainers in the service sector continue to be health care (bed pans), leisure (burger-flipping) and government (only God knows what they do).
Actually, the biggest gain was in Professional and Business Services with 50,000 new jobs created. But I'm not surprised you didn't mention that since it doesn't fit with the story you've already decided on. Data be damned!
Employed persons (Current Population Survey)
Persons 16 years and over in the civilian noninstitutional population who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees; worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family; and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs. Each employed person is counted only once, even if he or she holds more than one job. Excluded are persons whose only activity consisted of work around their own house (painting, repairing, or own home housework) or volunteer work for religious, charitable, and other organizations.
the ADP report is a payroll survey rather then a househould survey.
the ADP report is a payroll survey rather then a househould survey.
Good point ron, very good point. But doesn't the BLS also do a payroll survey at some point & does the ADP report correlate better with that?
And if they both DO a payroll survey are they counting the same things? I know the variance between BLS household & payroll surveys is that payroll 'supposedly' doesn't count all the kitchen table entrepreneurs while household does.
Every job report contains a payroll and a household survey. The payroll number gets most attention from economists, the household number is used to calculate the unemployment rate and is the focus of media. And I don't know why anyone would have listened to the ADP report to begin with. At best it is a biased estimate with poor seasonal adjustment.
The decline in retail jobs is NOT a harbinger of recession. Rather it reflects industry consolidation, a shift in business to higher productivity formats, and a shift in strategy among many big box retailers like Home Depot away from customer service. Add in regular productivity gains from improved technology and inventory management and you get a slight decline in employment
...I'm not surprised you didn't mention that since it doesn't fit with the story you've already decided on. Data be damned!
That's a very interesting comment given the very strong correlation between declines in home sales and economic downturns as well as past payroll data that shows job creation frequently remains strong until just a few months prior to the onset of recessions.
Of course it's relevant. Show me where I dismissed it.
Well maybe I just misunderstood you. I got the impression you were suggesting that today's payroll data is somehow at odds with a bearish economic outlook. But looking at past payroll data I don't see this is the case.
from the BLS report:
Professional and business services employment continued to expand in December
with a gain of 50,000. Job gains occurred in services to buildings and dwellings
(13,000) and in management and technical consulting services (7,000). Employment
continued to trend up in architectural and engineering services and in computer
systems design and related services. Temporary help services employment was
little changed over the month and over the year.
Health care added 31,000 jobs in December. Employment rose in ambulatory
health care services (14,000), hospitals (11,000), and nursing and residential
care facilities (7,000). Over the year, health care employment increased by
324,000, with gains spread throughout the component industries.
Job growth continued in food services and drinking places (23,000) in December.
In the past 12 months, food services added 304,000 jobs, accounting for most of the
over-the-year increase in leisure and hospitality employment.
The decline in retail jobs is NOT a harbinger of recession. Rather it reflects industry consolidation, a shift in business to higher productivity formats, and a shift in strategy among many big box retailers like Home Depot away from customer service.
I agree - if we start heading into recession the stores will start closing & the retail layoffs will come in big numbers not trickles like this.
My son works a part-time job doing sales floor inventory control at a retailer at Mall of America - completely live real-time online to corporate global ERP... some via 'RFID tags' and some via 'bar code wand'. He still has to 'manually move & resort' but the system is highly automated from a data capture & control perspective - lot's less muddling & guessing and far more productive.
Professional and business services employment continued to expand in December with a gain of 50,000. Job gains occurred in services to buildings and dwellings (13,000)
Real Estate related... hmmmm.
The irony is that if RE continues its decline this category might increase since SOMEBODY has to manage the properties in foreclosure. They don't manage themselves.
Professional and business services employment continued to expand in December with a gain of 50,000. Job gains occurred in services to buildings and dwellings (13,000)
Real Estate related... hmmmm.
The irony is that if RE continues its decline this category might increase since SOMEBODY has to manage the properties in foreclosure. They don't manage themselves.
Well maybe I just misunderstood you. I got the impression you were suggesting that today's payroll data is somehow at odds with a bearish economic outlook. But looking at past payroll data I don't see this is the case.
Of course it's at odds with a bearish economic outlook, how can it not be?
That doesn't mean that there isn't data out there that does support a bearish outlook. All of the things that CR mentions on this blog concern me quite a bit, but that doesn't mean I can't be flexible enough to acknowledge good data. That was my point.
With respect to the post I was responding to, the fact that mp presented all of the gains from the service sector as evidence of a poor report and then proceeded to list all of the sectors and associated jobs EXCEPT for the one that had the largest gains and also happens to be the highest paying sector suggests to me that he's more interested in fitting the data to a position he's already decided on rather than impartially analyzing the numbers.
If I'm mistaken he can correct me, but that's sure what it looks like.
Of course it's at odds with a bearish economic outlook, how can it not be?
Because strong job growth frequently preceeds economic downturns. Look at the strong job growth in early 1990, for example, that rapidly degenerated into steep losses a few months later.
I don't think a strong payroll number tells you anything without some context. If the payroll growth is economically justified then I'd say it's certainly a bullish sign. If, on the other hand, it results from overcapacity or misallocation, I'd argue it's actually a bearish sign (since it may indicated wasted money/resources).
There seems to be a split between our host's approach to the retail employment data, which is to compare it to past cycles and see what can be learned, and what appears to be a simple declaration by CES (seconded by dryfly) that the historical relationship no longer applies. Dismissal of our hosts data-based argument does not constitute a counterargument.
It may turn out that recession does not follow a persistent fall in retail employment this time. It may be that recession doesn't follow a big drop in new home sales this time. It could be different this time. Declaring that it is different this time doesn't add much to the argument.
As to the 13k jobs in "services to businesses and dwellings" the ISM non-factory report noted that rental and leasing activity grew in December, while construction activity fell. Rental and leasing would fall into services to building and dwellings, so there is consistency between the two reports.
Not always. Take a look at the most recent recession. Signs of weakness in the labor market was seen nearly a year before the recession started. So the job report today is at least somewhat at odds with a bearish outlook. The degree at which it is at odds is up for debate.
I guess a little context is needed. Many people seem to think we're on the brink of a recession. 3-6 months ago I think that position may have held more weight. Recently, however, there has been more evidence that while the housing bust is certainly slowing the economy, it might not be enough to cause a recession.
It's still up in the air as far as I'm concerned. If we do get a recession, I don't think the recent data points to that happening soon. By soon I mean in the next six months, which many of the bearish experts thought was an absolute lock 3 months ago. Even Roubini seems to be backing off of his Q1 recession prediction.
So, yes, there are bad signs out there. There are also some that suggest things aren't as bad as originally thought. I don't know which way things are going to go and I'm highly suspicious of anyone who says they do. It's fine to have a position and make predictions, but one shouldn't become so entrenched in a position that they refuse to accept other possibilities.
There seems to be a split between our host's approach to the retail employment data, which is to compare it to past cycles and see what can be learned, and what appears to be a simple declaration by CES (seconded by dryfly) that the historical relationship no longer applies.
No - that isn't what was implied - what I (and I think CES) tried to say was THIS particular retail job loss data point does not suggest an imminent recession because there have been so many structural changes to how retail is done that some minor job loss would be expected.
I think it is safe to say if we see a HUGE drop in retail employment (very negative) that would indicate an imminent recession.
We weren't criticizing CR's methodology only pointing out the current result doesn't necessarily predict a recession NOW.
As to the 13k jobs in "services to businesses and dwellings" the ISM non-factory report noted that rental and leasing activity grew in December, while construction activity fell. Rental and leasing would fall into services to building and dwellings, so there is consistency between the two reports.
Agreed. And I wouldn't be surprised to see this number grow in the months to come as construction employment declines... that would make for an interesting chart as well.
FWIW I would agree that the 2006 Q4 payroll results are very much at odds with forcasts like Roubini's of 0% Q4 GDP growth and Q1 recession. I think Roubini may have misinterpreted the signficance of the rapid decline in oil prices in 2006. But I think the existing payroll data makes the case that the window begins to open wider from Q2 on. And of course the past payroll data my not apply well to the current situation, but I haven't run into any arugments as to why yet.
I think Roubini may have misinterpreted the signficance of the rapid decline in oil prices in 2006.
I think he ought to have been talking more to his 'partner', Brad Setser, in the 'next cubicle'... I don't see how we get Zero GDP with the current level of liquidity pouring in.
Not saying that excess liquidity is a 'good thing' just that it's pretty hard to have declining activity IN AGGREGATE with that much gas.
Steve, I would LOVE to be a bull, I really would. I didn't mention professional because I missed it. Call me a permabear if you want, but it was unintentional.
Frankly, I'm not so impressed with those "high paying" jobs either. Many of them add little value.
Can anyone envision a sustainable macro economy where we import all of our 'stuff' and export only Boeings, accounting services and life insurance policies?
kharris -- sorry to be so late-
normally do not comment here.
1st -- in Oct and Nov real PCE growth was 0.5%. In December auto sales jumped from 16.7 (SAAR) to 16.9 in november. So december real PCe should also be strong.
With the real trade numbers apparently improving sharply then 4th Q real gdp growth should be much stronger then generally expected.
In the 4th Q hours worked were up some 1.9%-- so with 4th q real gdp strong we should see a very nice bounce in 4th Q productivity.
This implies we should continue to see solid profits growth with no significant upward pressure on unit labor costs.
But fed worry about core inflation is still justified -- if for no other reason then the weak dollar means that prices of consumer goods imports are now rising.
I think in the modern economy the system is able to adjust to shocks like higher oil prices and weak housing better then it use to.
So now we see mini-cycles rather then major overshoots and correction thorough a recession then we saw in earlier eras.
So what we are seeing is that we have experienced the down side of the mini-cycle and are now starting to see the upside
the stockmarket is not a leading indicator, that's a myth, in 2000 it did not lead the gdp trend and in 2001-2002 it was severely lagging the economy
it CAN be a leading indicator, mostly by pure luck, the problem with the stockmarket is that it discounts many turns in the economy that never happens and it misses many that do happen (and having to catch up like in 2002-2003)
I do see plenty of "help wanted" signs in retailer's windows in NC. The job market doesn't seem about to tank here at least.
I have had to step back and open my mind to the possibility that we will see an "orderly" decline in housing that lasts several years.
If the inventory overhang this spring is not impacting the overall economy, I may get off the shelf a bit and put some savings back into the market.
2008 is an election year, and unless things are really obviously struggling (such as they were in 1992) it is usually good to be in the market during presidential election cycles.
decent job gains in dec, revisions upward in oct and nov, largest income growth in 8 months. economy seems to be weathering the housing weaknesses ok so far. further fuel that consumers can keep the party going.
And not the employment to population ratio increased from 66.3% to 66.4%. Inching closer to full employment.
What is typical for Dec employment? I would expect Dec employment change to be higher than most months due to the temporary holiday employment?
Well, whatever they usually are, they blew out expectations for the second time in a row.
I wonder if this is a trend.
This job number was probably the worst outcome for the bulls. Stock market has been going up because they were hoping for the Fed to start cutting rates. Strong number has the Fed fighting inflation that does NOT exist.
Since the job numbers are a lagging indicator, the Fed will only cut after we are already in a recession and the cuts will come too late to save the economy.
Haven't we seen this before?
ormaldist,
There are seasonally adjusted data, so holiday hiring should be accommodated, to the extent that it is similar to holiday hiring in recent years. In non-seasonally adjusted data, December is typically a net layoff month, rather than a hiring month.
There are lots of signs of a tighter labor market. The hiring diffusion indices were higher in Q4 than in Q3. Aggregate hours rose twice as fast in Q4 as Q3 (bad for productivity, all else equal). Both suggest hiring may hold up into Q1, though retail adjustments are tricky around the turn of the year.
If these numbers hold up, I don't think anybody's going to be paying much attention to the ADP report in the future.
I wish spencer would show up. He has made the point in the past that a slowdown in productivity growth (which may have continued into Q4) often leads a slowdown in growth. It would be nice to know the extent of slowdown that we might expect, based on this relationship.
"Strong number has the Fed fighting inflation that does NOT exist."
Are you joking? Have you been grocery or clothes shopping lately?
I've been a bear for the last couple of years, but I'm beginning to doubt my convictions. But I also realize when the last bear turns to a bull, that's when things collapse.
From Bloomberg:
I don't know what to make of the rise in wages. How does this compare to November 2000?
umber2son,
You can argue that point, but why with clothing? Retailers have everything on sale and can't give it away.
My point was that the Fed SHOULD be cutting rates right now. The stock market wants rate cuts. There is weakness in the economy(Credit bubble, housing bubble, copper and commodity prices falling, etc) but the Fed won't act until the numbers confirm the recession, or extremely hard landing. They are always late to the party.
Fed cutting rates is the only thing that can save SOME of the people who are over their heads in mortgage debt. What that would do to the Dollar, is another question.
Yes, but lower crude prices are a counter-inflationary indicator. I view this as a very good employment report. Yes, it shows the housing-related weaknesses, but it also shows that we are starting to deal with this employment trend from a relatively favorable stance.
I do worry about the absorption of the displaced workers, though. They're not going to be picked up much in manufacturing, and I doubt most of them will find great success in the restaurant industry.
Business and professional services aren't going to give these people new jobs.
Fair enough RM -- I just don't buy the argument that the housing situation can be rescued at this point by lower FF rates. Mortgage interest rates are already extremely low by historical standards. The problem is rather that too many people have too little equity in their home and have overextended themselves.
I don't believe there is any easy way out of this situation other than a gradual lowering of home prices to levels that meet a common sense test of affordability.
Oil is correcting because its growth in the first place was speculative and unsustainable. I mean $78/barrel oil prices, cmon now.
Winter is much warmer than expected, stockpiles are forming in inventory reports, and OPEC cant enforce prod cuts, the correction seems warranted.
This jobs report proves the surge in equities over the past 5-6 months, last I checked the stock markets are a leading indicator of economic strength and a surging market means good data to come; and now its coming.
Why would the fed cut rates now with still inflation pressures? Core PCE is still above comfort zone, PPI has been above estimates, commodities prices are still very high, although some precious metals are correcting, we still have potential issues w/ inflation that the fed cannot discount.
No way they cut rates, especially with this jobs data that came out today! Stocks should give up some gains as the hope for fed cuts until at least later in the year are becoming more realistic.
Plus housing is NOT as bad as people were expecting. I worry that future weaker jobs data and tightening lending standards might be the 2nd wind tothe housing cooldown later in the year.
UrbanDigs,
I agree with your analysis of the oil price. But considering the stock market to be a leading indicator can be a spectacularly bad idea, especially for an investor...
Maybe it just shows companies don't like to lay people off before Christmas....
Sorry, CR, but I don't see any "solid" about this report. Employment in goods-producing industries continues to lose ground, and the big gainers in the service sector continue to be health care (bed pans), leisure (burger-flipping) and government (only God knows what they do).
I've been a bear for the last couple of years, but I'm beginning to doubt my convictions. But I also realize when the last bear turns to a bull, that's when things collapse.
Me too - but I'm not going 'bullish' until I see evidence the average American's debt load relative to income is declining.
And I'm not as impressed with the bull argument that assets to debts should be the key metric because asset values fluctuate a lot more than most people's incomes... ultimately it is 'income' that most people eat from.
So while this report is VERY good news (it is impossible to pay down debt & save without income or earnings) I am not ready to go completely ga-ga until I see the debt picture improve.
For the most part, I agree with RM's posts above. My view is that any Fed action is now definitely on hold.
This job number was probably the worst outcome for the bulls. Stock market has been going up because they were hoping for the Fed to start cutting rates.
I disagree - I think there is PLENTY of liquidity out there worldwide to support the markets without the Fed throwing more gasoline on the fire.
The liquidity isn't showing up in 'price inflation' rather in 'asset bubbles'. Time to strangle that beast if they can.
Sorry, CR, but I don't see any "solid" about this report. Employment in goods-producing industries continues to lose ground, and the big gainers in the service sector continue to be health care (bed pans), leisure (burger-flipping) and government (only God knows what they do).
I agree - which is yet one more reason why the Fed shouldn't cut... when rates are really low or really high... that is when the financial markets can really game the system and discourage 'productive activities'.
And since people eat food, drive cars, etc., and don't eat or drive paper... it's a good idea to motivate somebody to grow food, make cars, etc.
And expecting foreigners to do all our dirty work while we send them nothing but paper is 'unsustainable' at best. Somewhere in there we have to increase the amount of 'goods & services' we provide in exchange.
That is most likely to occur when the interest rate approximates the 'neutral rate'... neither excessively stimulating nor excessively dampening. I think they are pretty close - at least for the conditions we have now. If global liquidity goes bye-bye then all that changes.
A neutral rate won't fix currency manipulation but at least it takes care of our own liquidity generation. One key piece of the puzzle.
Dryfly's liquidity argument makes sense. If you look at stock buybacks, you have to be a bit suspicious of the simple "stocks respond to improved economic prospects" argument that takes stocks as a leading indicator. S&P500 firms are refinancing, retiring debt and retiring stock at a very rapid clip. All of that looks good for earnings per share, without saying anything about the core business. The numerator is going up due to reduced financing costs. The denominator is going up due to reduced shares outstanding. More units produced is another matter. This looks like a liquidity-dominated stock market.
That said, there is room out there for lots of opinions. Money markets were pricing in higher odds of an ease, and earlier easing, in December than now.
Sorry, CR, but I don't see any "solid" about this report. Employment in goods-producing industries continues to lose ground, and the big gainers in the service sector continue to be health care (bed pans), leisure (burger-flipping) and government (only God knows what they do).
Actually, the biggest gain was in Professional and Business Services with 50,000 new jobs created. But I'm not surprised you didn't mention that since it doesn't fit with the story you've already decided on. Data be damned!
Professional and Business Services with 50,000 new jobs created
Which do what? Kind of like saying the jobs growth was among 'workers'.
Employment defined by the BLS:
Employed persons (Current Population Survey)
Persons 16 years and over in the civilian noninstitutional population who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees; worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family; and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs. Each employed person is counted only once, even if he or she holds more than one job. Excluded are persons whose only activity consisted of work around their own house (painting, repairing, or own home housework) or volunteer work for religious, charitable, and other organizations.
the ADP report is a payroll survey rather then a househould survey.
mp, "solid" by the number of jobs. I agree that the quality of the jobs, wages, etc. deserves consideration.
Best to all.
the ADP report is a payroll survey rather then a househould survey.
Good point ron, very good point. But doesn't the BLS also do a payroll survey at some point & does the ADP report correlate better with that?
And if they both DO a payroll survey are they counting the same things? I know the variance between BLS household & payroll surveys is that payroll 'supposedly' doesn't count all the kitchen table entrepreneurs while household does.
Anyone know?
Every job report contains a payroll and a household survey. The payroll number gets most attention from economists, the household number is used to calculate the unemployment rate and is the focus of media. And I don't know why anyone would have listened to the ADP report to begin with. At best it is a biased estimate with poor seasonal adjustment.
The decline in retail jobs is NOT a harbinger of recession. Rather it reflects industry consolidation, a shift in business to higher productivity formats, and a shift in strategy among many big box retailers like Home Depot away from customer service. Add in regular productivity gains from improved technology and inventory management and you get a slight decline in employment
...I'm not surprised you didn't mention that since it doesn't fit with the story you've already decided on. Data be damned!
That's a very interesting comment given the very strong correlation between declines in home sales and economic downturns as well as past payroll data that shows job creation frequently remains strong until just a few months prior to the onset of recessions.
Why is that data not relevant?
Why is that data not relevant?
Of course it's relevant. Show me where I dismissed it.
Of course it's relevant. Show me where I dismissed it.
Well maybe I just misunderstood you. I got the impression you were suggesting that today's payroll data is somehow at odds with a bearish economic outlook. But looking at past payroll data I don't see this is the case.
from the BLS report:
Professional and business services employment continued to expand in December
with a gain of 50,000. Job gains occurred in services to buildings and dwellings
(13,000) and in management and technical consulting services (7,000). Employment
continued to trend up in architectural and engineering services and in computer
systems design and related services. Temporary help services employment was
little changed over the month and over the year.
Health care added 31,000 jobs in December. Employment rose in ambulatory
health care services (14,000), hospitals (11,000), and nursing and residential
care facilities (7,000). Over the year, health care employment increased by
324,000, with gains spread throughout the component industries.
Job growth continued in food services and drinking places (23,000) in December.
In the past 12 months, food services added 304,000 jobs, accounting for most of the
over-the-year increase in leisure and hospitality employment.
The decline in retail jobs is NOT a harbinger of recession. Rather it reflects industry consolidation, a shift in business to higher productivity formats, and a shift in strategy among many big box retailers like Home Depot away from customer service.
I agree - if we start heading into recession the stores will start closing & the retail layoffs will come in big numbers not trickles like this.
My son works a part-time job doing sales floor inventory control at a retailer at Mall of America - completely live real-time online to corporate global ERP... some via 'RFID tags' and some via 'bar code wand'. He still has to 'manually move & resort' but the system is highly automated from a data capture & control perspective - lot's less muddling & guessing and far more productive.
It isn't your grandfather's retail anymore.
Professional and business services employment continued to expand in December with a gain of 50,000. Job gains occurred in services to buildings and dwellings (13,000)
Real Estate related... hmmmm.
The irony is that if RE continues its decline this category might increase since SOMEBODY has to manage the properties in foreclosure. They don't manage themselves.
Hey there is always a silver lining somewhere.
Professional and business services employment continued to expand in December with a gain of 50,000. Job gains occurred in services to buildings and dwellings (13,000)
Real Estate related... hmmmm.
The irony is that if RE continues its decline this category might increase since SOMEBODY has to manage the properties in foreclosure. They don't manage themselves.
Hey there is always a silver lining somewhere.
Well maybe I just misunderstood you. I got the impression you were suggesting that today's payroll data is somehow at odds with a bearish economic outlook. But looking at past payroll data I don't see this is the case.
Of course it's at odds with a bearish economic outlook, how can it not be?
That doesn't mean that there isn't data out there that does support a bearish outlook. All of the things that CR mentions on this blog concern me quite a bit, but that doesn't mean I can't be flexible enough to acknowledge good data. That was my point.
With respect to the post I was responding to, the fact that mp presented all of the gains from the service sector as evidence of a poor report and then proceeded to list all of the sectors and associated jobs EXCEPT for the one that had the largest gains and also happens to be the highest paying sector suggests to me that he's more interested in fitting the data to a position he's already decided on rather than impartially analyzing the numbers.
If I'm mistaken he can correct me, but that's sure what it looks like.
Of course it's at odds with a bearish economic outlook, how can it not be?
Because strong job growth frequently preceeds economic downturns. Look at the strong job growth in early 1990, for example, that rapidly degenerated into steep losses a few months later.
I don't think a strong payroll number tells you anything without some context. If the payroll growth is economically justified then I'd say it's certainly a bullish sign. If, on the other hand, it results from overcapacity or misallocation, I'd argue it's actually a bearish sign (since it may indicated wasted money/resources).
With respect to the post I was responding to, the fact that mp presented all of the gains...
Ah, then I was the one who misunderstood... I didn't realize you were responding to that post.
There seems to be a split between our host's approach to the retail employment data, which is to compare it to past cycles and see what can be learned, and what appears to be a simple declaration by CES (seconded by dryfly) that the historical relationship no longer applies. Dismissal of our hosts data-based argument does not constitute a counterargument.
It may turn out that recession does not follow a persistent fall in retail employment this time. It may be that recession doesn't follow a big drop in new home sales this time. It could be different this time. Declaring that it is different this time doesn't add much to the argument.
As to the 13k jobs in "services to businesses and dwellings" the ISM non-factory report noted that rental and leasing activity grew in December, while construction activity fell. Rental and leasing would fall into services to building and dwellings, so there is consistency between the two reports.
ac
Not always. Take a look at the most recent recession. Signs of weakness in the labor market was seen nearly a year before the recession started. So the job report today is at least somewhat at odds with a bearish outlook. The degree at which it is at odds is up for debate.
I guess a little context is needed. Many people seem to think we're on the brink of a recession. 3-6 months ago I think that position may have held more weight. Recently, however, there has been more evidence that while the housing bust is certainly slowing the economy, it might not be enough to cause a recession.
It's still up in the air as far as I'm concerned. If we do get a recession, I don't think the recent data points to that happening soon. By soon I mean in the next six months, which many of the bearish experts thought was an absolute lock 3 months ago. Even Roubini seems to be backing off of his Q1 recession prediction.
So, yes, there are bad signs out there. There are also some that suggest things aren't as bad as originally thought. I don't know which way things are going to go and I'm highly suspicious of anyone who says they do. It's fine to have a position and make predictions, but one shouldn't become so entrenched in a position that they refuse to accept other possibilities.
There seems to be a split between our host's approach to the retail employment data, which is to compare it to past cycles and see what can be learned, and what appears to be a simple declaration by CES (seconded by dryfly) that the historical relationship no longer applies.
No - that isn't what was implied - what I (and I think CES) tried to say was THIS particular retail job loss data point does not suggest an imminent recession because there have been so many structural changes to how retail is done that some minor job loss would be expected.
I think it is safe to say if we see a HUGE drop in retail employment (very negative) that would indicate an imminent recession.
We weren't criticizing CR's methodology only pointing out the current result doesn't necessarily predict a recession NOW.
As to the 13k jobs in "services to businesses and dwellings" the ISM non-factory report noted that rental and leasing activity grew in December, while construction activity fell. Rental and leasing would fall into services to building and dwellings, so there is consistency between the two reports.
Agreed. And I wouldn't be surprised to see this number grow in the months to come as construction employment declines... that would make for an interesting chart as well.
Anonymous | 01.05.07 - 2:49 pm | #
was 'me'
Steve,
FWIW I would agree that the 2006 Q4 payroll results are very much at odds with forcasts like Roubini's of 0% Q4 GDP growth and Q1 recession. I think Roubini may have misinterpreted the signficance of the rapid decline in oil prices in 2006. But I think the existing payroll data makes the case that the window begins to open wider from Q2 on. And of course the past payroll data my not apply well to the current situation, but I haven't run into any arugments as to why yet.
I think Roubini may have misinterpreted the signficance of the rapid decline in oil prices in 2006.
I think he ought to have been talking more to his 'partner', Brad Setser, in the 'next cubicle'... I don't see how we get Zero GDP with the current level of liquidity pouring in.
Not saying that excess liquidity is a 'good thing' just that it's pretty hard to have declining activity IN AGGREGATE with that much gas.
JMHO.
Dryfly, also servicing of dicey mortgages will require ramp-ups in personnel. The bank/finance numbers looked strong.
Steve, I would LOVE to be a bull, I really would. I didn't mention professional because I missed it. Call me a permabear if you want, but it was unintentional.
Frankly, I'm not so impressed with those "high paying" jobs either. Many of them add little value.
Can anyone envision a sustainable macro economy where we import all of our 'stuff' and export only Boeings, accounting services and life insurance policies?
kharris -- sorry to be so late-
normally do not comment here.
1st -- in Oct and Nov real PCE growth was 0.5%. In December auto sales jumped from 16.7 (SAAR) to 16.9 in november. So december real PCe should also be strong.
With the real trade numbers apparently improving sharply then 4th Q real gdp growth should be much stronger then generally expected.
In the 4th Q hours worked were up some 1.9%-- so with 4th q real gdp strong we should see a very nice bounce in 4th Q productivity.
This implies we should continue to see solid profits growth with no significant upward pressure on unit labor costs.
But fed worry about core inflation is still justified -- if for no other reason then the weak dollar means that prices of consumer goods imports are now rising.
I think in the modern economy the system is able to adjust to shocks like higher oil prices and weak housing better then it use to.
So now we see mini-cycles rather then major overshoots and correction thorough a recession then we saw in earlier eras.
So what we are seeing is that we have experienced the down side of the mini-cycle and are now starting to see the upside
dryfly -- your comments on your son were exactly what I was talking about when i was talking about structural changes in the economy.
the stockmarket is not a leading indicator, that's a myth, in 2000 it did not lead the gdp trend and in 2001-2002 it was severely lagging the economy
it CAN be a leading indicator, mostly by pure luck, the problem with the stockmarket is that it discounts many turns in the economy that never happens and it misses many that do happen (and having to catch up like in 2002-2003)
I do see plenty of "help wanted" signs in retailer's windows in NC. The job market doesn't seem about to tank here at least.
I have had to step back and open my mind to the possibility that we will see an "orderly" decline in housing that lasts several years.
If the inventory overhang this spring is not impacting the overall economy, I may get off the shelf a bit and put some savings back into the market.
2008 is an election year, and unless things are really obviously struggling (such as they were in 1992) it is usually good to be in the market during presidential election cycles.