CR, have you factored Gulf Coast reconstruction into your estimates for construction employment?
I'm thinking about the guy who loses his construction job in Florida or Vegas and moves to Waveland and finds work there. Maybe reconstruction is moving slow because there aren't enough workers. If that's the case, maybe there won't be a huge decline in construction employment.
Not saying that's the case; just wondering if it is.
lets do the math. 118.000 jobs via the black box "birth death model" (vs 116.000 in 2005 were the economy wasn´t in a downturn) and of the 97.000 created were 39.000 40% government jobs. ouch! very very weak.
You might not expect it, but Las Vegas is struggling to find enough construction workers. Commercial construction is still booming there and will be for a while. They're offering singing bonuses and relocation packages to construction workers from outside the area to relocate there. Vegas struggles to meet construction demand
That said, I do think we'll see large residential construction losses eventually. What is interesting is that at least some of the construction losses in February is due to the cold weather (per the BLS).
Again, not even close to recessionary. We need to see the employment report put up goose eggs before we can entertain any thought that a recession even close to nearby.
What's interesting is that unemployment number. On the face of things, it just doesn't make sense that unemployment dropped while Feb job creation was just 95K and 4 week moving avg of unemployment claims trended higher.
I asked CR, but he indicated that he is busy, so I thought I'd take some initiative and ask the group.
I noticed Tanta complaining about retyping an explanation of Fannie Mae and Freddie Mac in a recent thread.
Is there anyone who would be willing and able to set up a wiki that could be used for definitions and explanations that seem to come up often?
My idea is that the wiki would be linked from here, with CR's imprimatur. Select people, determined by CR, would be able to edit the wiki, and perhaps provide definitions and acronym explanations for stuff that comes up often.
I think as the housing problem becomes more visible to the mainstream, CR's blog will get a lot more novices, and it would both be a nice service and a way of avoiding repeating explanations.
Just an idea. I'm not capable of hosting or setting up a wiki, otherwise I'd do it myself.
From Barry's "Big Picture" blog today, "The data from both BLS and ADP is not consistent with a strong economy. Remember, it takes about 150k per month to merely keep up with population growth -- in other words, 150k new jobs per month is zero job growth as a percentage relative of total population and the labor pool. We were adding 250k-300k per month in the 90s, and even just two years ago when the housing boom was in full swing the numbers were in the 175-225k.
So where are we? As the chart below shows, this remains one of the weakest post-recession job creation cycles in the post war era. And as we have seen over the past few quarters, even that modest pace of job creation is now decelerating."
See the chart at his site. It moves the starting point of the "recovery" to the end of the recession. It is a somehat gloomier picture than the first chart presented on this site. It also has a timeline that corresponds more to the timeline of the 2nd and 3rd chart in this post.
Also, with respect to comments in a previous post, it was noted by someone that 2/3 of hispanic immigrants went to work in the construction business (probably most in residential construction). That is a big number of displaced workers that will probably show up less in employment numbers but have more of an effect on retail sales (like at Walmart, which had disappointing sales).
The drop in non-residential construction employment will have more of an effect on mid and lower-upper range spending than the drop in residential construction. The pay rates of union construction workers has allowed for a major amount of discretionary spending, often spent on expensive new "toys". While these people will still have to dress and eat (maintaining sales at low end retailers), "toy" manufacturers and retailers, etc., all should experience a fall. Also in this range of spending were real estate agents, mortgage sales, etc..
Expect big retail drops in the next few months. It will be accelerated by rising gas prices.
Holden Lewis, I'm sure that is a factor (Gulf reconstruction), but those numbers are included in the housing starts / completion numbers - and I believe employment will follow completions (as it has in the past).
charts, if you see "goose eggs" or worse, you are in a recession. You will get no warning from this report. In fact you usually see the goose eggs in the downward revisions - I would completely ignore this report for forecasting.
jmf, once we strip out the government jobs (39K), we find that ADP did pretty well this time (57K vs. 58K).
Las Vegas is building casinos in reponse to the spenders of the last few years. What happens when the rest of economy, California especially, stumbles?
WRT unemployment rate, this is the only number typically headlined in the news, is it any wonder that it has stayed at record lows during a weak job market?
"Las Vegas is building casinos in reponse to the spenders of the last few years. What happens when the rest of economy, California especially, stumbles?"
Perhaps free room offers if you only spend some time on the gambling floor?
jmf, the birth death model is no big deal. Because companies are started (and fail) all the time, the BLS came up with a system to account for these companies. From the above link:
"There is an unavoidable lag between an establishment opening for business and its appearing on the sample frame and being available for sampling. Because new firm births generate a portion of employment growth each month, non-sampling methods must be used to estimate this growth."
Read the details. One of the biggest mistakes I see in discussions is mixing the Seasonally Adjusted (SA) headlines number with the Not Seasonally Adjusted (NSA) birth death number.
"Note that the the net birth/death figures are not seasonally adjusted, and are applied to not seasonally adjusted monthly employment links to determine the final estimate."
The model will cause the BLS to miss any turning points - and is one of the reasons this data series is useless for forecasting:
"The most significant potential drawback to this or any model-based approach is that time series modeling assumes a predictable continuation of historical patterns and relationships and therefore is likely to have some difficulty producing reliable estimates at economic turning points or during periods when there are sudden changes in trend."
ams16,
Maybe CR can charge a fee for the reference subscription...
Seriously, that's a great idea. I have just enough organic hard-drive space for FASB, SAB, SOP, EITF, etc.
CR,
I recollect from previous posts on this subject that the red line was trending in the middle of the grey range. What changed? Is it the time scale?
Just ask'
Hand-in-hand with weaker job growth comes weak earnings growth by workers, of course. To the $10 per week increase in take-home pay that the average production worker has received since the year 2000, in February they were able to add another $0.30. Unfortunately, that only made up for about half of the fall in average weekly pay that they took home in January
Sebastian,
I see nothing regarding any type of forecast revision, official or otherwise, in CR's response. Why would you ask that? I hear a strawman creeping up here...
Another discrepancy is between the Pew numbers on Hispanics and the Hispanic unemployment rate shown for BLS.
Theory one: Hispanics simply move to areas where there are these jobs. Theory two: we're missing a lot of unemployment due to the sampling methods.
If theory one is right, the state UI numbers should come in consistent with BLS. If theory two is right, the state UI numbers will come in below BLS, reversing last year's trend.
As a refugee from the Austin Dot-com shake out (now living in the mountains of southern NM), I'd like to know if there is any research on the impact of real estate reversals in "primary residence" markets on "resort properties"?
How long is the lag between a price correction in "primary residences" and vacation property price declines?
Do second homes suddenly get "dumped" all at once or do second homeowners generally have better "staying power" and the ability to ride out the storm?
I've published my take on jobs reports as well. It boils down to the fact that rate cuts the mental Cramer is salivating on are impossible until jobs cool down.
while of course it is possible that the US is about to enter a very difficult time i think too you need to consider that when construction is going full blast it is difficult to get anybody decent to do your bathroom or fix your roof. Once the better paid jobs ease then these guys begin doing the odd jobs or for example begin driving trucks.
The experience of the UK recently and that of Australia was that the world did not end as predicted .....instead it just paused and entered another phase
And it is worth considering that this year is forcast to be another "good" hurricane season so builders can look forwards to a great deal of rebuilding. If the forcasts are right then the storms will be much further north than in recent year and i imagine that equates to more damage or more repairs needed.
Here's an anecdote only. I live in a resort market. The adjoining residential part of this area is seeing the same downturns as other places. The resort area itself has slowed in terms of price growth and unit sales, but sales prices just aren't going down. Why? My suspicion is the these folks are so well heeled that they almost never have to sell, they will wait for their price.
Yup and I don't think that was all 'Wall Street bonus' effect either (that was the complaint in December & January).
Again, not even close to recessionary. - charts
Another 'yup'... and no goose eggs in sight yet.
The private sector job creation is looking weak. - charts
But as we saw yesterday with weekly numbers, not a lot of evidence of accelerating job loss either... not much gain, not much loss. Is it the quiet before the storm or the quiet before the calm.
Always appreciate your comments MOM, but this one I strongly suspect that the upward adjustment based on state UI receipts incorporated from 2006 is on the way to reversing itself.
trying to push back at the benchmark revisions noted last Dec were based on tax receipts from employers, no? Or are we talking about different adjustments?
It seems to me what is hidden in those reports are the actual hours and therefore rates paid to illegal immigrants...not much different from the slaves that our media have no problem highlighting in the backwaters of Brazil.
In addition to our host's explanation of what the birth/death plug does, there is a simple fact about the use of the plug that should be kept in mind. It goes in before seasonal adjustment. The plug is of roughly the same magnitude each February, in the 100-120k range. Since it adds roughly the same amount each February, seasonal adjustment factors will pick it up and to a great extent, adjust it back out.
The rise in employment prior to seasonal adjustment in February, including the plug, was 705k jobs. In January there was a loss of 2.78 mln jobs prior to seasonal adjustment. Given swings of that magnitude in the NSA data, picking out the plug as a substantial factor behind the performance of the seasonally adjusted number doesn't make sense.
You are right that private hiring was soft, probably softer than expected by most forecasters who mostly had anticipated the reported job gain.
Charts,
Have to agree with our host. Employment data lag output growth, and lead inflation by a bit. If we wait to see zero job growth, we will very likely already be in recession. We can take some comfort from the fact that, if the economy should fall into recession, we will have a hard time knowing it based on just about any measure. We find out about recession after the fact, rather than before.
Neal,
Barry over at Big Picture is using the high end of estimates of trend-like employment growth in that 150k figure. The low end is in the 110k-125k range. When expansions are old, trend-like growth becomes harder due to shortages of workers in lots of categories. Fed officials anticipate between 70k and 100k new jobs per month, on average, this year. Figures like those would not necessarily lead the Fed to ease.
Yes - the state tax receipts. There was a very large adjustment there. The nature of much construction employment is hard to capture in establishment/household surveys. You have construction crews that travel across the country. For example, there's a construction company in Tifton, GA, that specializes in golf course work and employs almost entirely Hispanics.
No question that keeping workers illegal tends to make them vulnerable. I do think it is a deliberate and harmful strategy.
There are several surveys that even suggest job growth should be increasing.
-Hudson Index
-Monster.com Index
-CFO business outlook
-Business Roundtable - 2007 CEO Economic Outlook Survey
-And the two employment components of the ISM reports for February both increased.
I still think it's reasonable to expect lower job growth in the coming months (due to construction), but I don't see much suggesting any significant weakness in the overall labor market.
For those interested in setting up a wiki, there are a number of places that will host it for you for free. Some examples (where you can go and set one up, some very simply) are PBwiki (pbwiki.com; I haven't tried it but it appears to be super-simple and very quick to set up) and Wikia (wikia.com, requires filling out a request form and satisfying some criteria).
ams16, I saw your post and I think it's an idea with some promise. Sorry I haven't responded to you, but I'm a little off today, and probably will be for a couple of days. The coffee just isn't winning the war against the medicine; at best it's a truce. So it's just taking me a lot longer to process information. Please don't feel ignored. I'll be back to my usual hyperdrive soon.
I still think it's reasonable to expect lower job growth in the coming months (due to construction), but I don't see much suggesting any significant weakness in the overall labor market.
I agree Steve and I'm no perennial bull. I just don't hear of cut backs in many places OUTSIDE auto supply chain & construction. Maybe cuts in retail & financial services is coming but I haven't seen evidence yet.
Now in fairness I see the weakness everyone here sees too & the 'logic' behind why labor markets should be softer... but with the continuing carry trade & overall liquidity... how can one expect it to be soft yet?
And for those folks saying the carry trade is 'dead'... reminds me of what Mark Twain said about reports of his own death (i.e. they are 'exaggerated')... I'd say its premature to call the carry trade dead.
USD-JPY Charts... Click on the 5 day button. Yen is back to 118 & rising.
check out PBworks: PBworks Online Collaboration for free wiki creation and hosting. Created by our friend Ramit Sethi over at iwillteachyoutoberich.com
The time stamp on your post is interesting. Kash leaves a comment under my post, which went up 11 minutes after the BLS release, as to how I was the early bird. But you post is time stamped two minutes before the BLS report was even released. Now did you beat me again - or has the daylight savings glitch already struck your computer?
Tanta - No worries. Feel better. That's much more important. And I wasn't expecting you to do the work, anyway. You already do too much.
As for the wiki, KMB pointed to some free sites. I'll check them out, and maybe set something up, for a trial. And put in some of the definitions I've gleaned over the past year and half. (I've been lurking for a while.)
(OT: Wikia is a new project by the Wikipedia founder.)
Thanks MOM. So IIRC that was an additional 1M as of Dec 06, but I have not seen how this was allocated to the various employment sectors. I did notice some ~10% wage gains attributed to q4 which were described as "bonuses" and I kind of think the Mexicans (why do we truck with "Hispanics" here people?) were not getting any of that.
Now about their exodus: is it because there are better economic opportunities in Mexico? Or are there non-construction sectors that can feel some pressure from an under-paid semi-skilled work force?
I suppose we know if the economy is really growing if that exodus materializes.
1M is about 3X the usual benchmark adjustment, but it doesn't reflect even the magnitude of the reported 12M illegal aliens...and for some, this makes the accuracy of so many recent stats (not just employment) troublesome.
Turning a blind eye to a few matters often enough may have more serious consequences than not being sure if the UE rate is 4.5% or 4.6%.
Tanta: Maybe this report will be fun to read all doped up.
Understanding the Evolving Inflation Process This temporal clustering narrows the set of G-7-wide economic developments which could have triggered the excessive monetary policy accomodation that was the ultimate source of the Great Inflation.
...
In a similar vein, De Long argues that a postwar Great Inflation was virtually inevitable in the United States, because there was no political consensus to tolerate the sustained high unemployment needed to combat inflation until inflation had proved sufficiently disruptive. 404 Not Found
Only Bloomberg seems to have this:
General Electric's WMC Mortgage Cuts Subprime Jobs
By Jody Shenn
March 9 (Bloomberg) -- General Electric Co.'s U.S. mortgage unit will curtail lending and fire 460 workers, or 20 percent of staff, amid a rise in defaults by people with poor credit.
GE's WMC Mortgage, the fifth-biggest subprime lender in the U.S., this week stopped making mortgages without down payments or to borrowers with credit scores below 600. WMC last year had $33 billion in new loan volume, according to industry newsletter Inside B&C Lending.
... and then reconcile with the following comments from your 3/9 post:
"Job growth has been solid for the last two years and is near the top of the expected range..... Overall this is a solid report."
I think both you, CR, and Mish are very good analysts, so I'm just curious about today's fairly glaring discrepancy between the two of you. I'd appreciate your comment, CR.
CR, have you factored Gulf Coast reconstruction into your estimates for construction employment?
I'm thinking about the guy who loses his construction job in Florida or Vegas and moves to Waveland and finds work there. Maybe reconstruction is moving slow because there aren't enough workers. If that's the case, maybe there won't be a huge decline in construction employment.
Not saying that's the case; just wondering if it is.
Wages are also strong - up 4.1% YOY.
hi,
i think this was a very weak number
lets do the math. 118.000 jobs via the black box "birth death model" (vs 116.000 in 2005 were the economy wasn´t in a downturn) and of the 97.000 created were 39.000 40% government jobs. ouch! very very weak.
the quality of the numbers is deteriorating
Holden,
You might not expect it, but Las Vegas is struggling to find enough construction workers. Commercial construction is still booming there and will be for a while. They're offering singing bonuses and relocation packages to construction workers from outside the area to relocate there. Vegas struggles to meet construction demand
That said, I do think we'll see large residential construction losses eventually. What is interesting is that at least some of the construction losses in February is due to the cold weather (per the BLS).
Again, not even close to recessionary. We need to see the employment report put up goose eggs before we can entertain any thought that a recession even close to nearby.
What's interesting is that unemployment number. On the face of things, it just doesn't make sense that unemployment dropped while Feb job creation was just 95K and 4 week moving avg of unemployment claims trended higher.
(Reposted)COMPLETELY OFF-TOPIC
I asked CR, but he indicated that he is busy, so I thought I'd take some initiative and ask the group.
I noticed Tanta complaining about retyping an explanation of Fannie Mae and Freddie Mac in a recent thread.
Is there anyone who would be willing and able to set up a wiki that could be used for definitions and explanations that seem to come up often?
My idea is that the wiki would be linked from here, with CR's imprimatur. Select people, determined by CR, would be able to edit the wiki, and perhaps provide definitions and acronym explanations for stuff that comes up often.
I think as the housing problem becomes more visible to the mainstream, CR's blog will get a lot more novices, and it would both be a nice service and a way of avoiding repeating explanations.
Just an idea. I'm not capable of hosting or setting up a wiki, otherwise I'd do it myself.
From Barry's "Big Picture" blog today, "The data from both BLS and ADP is not consistent with a strong economy. Remember, it takes about 150k per month to merely keep up with population growth -- in other words, 150k new jobs per month is zero job growth as a percentage relative of total population and the labor pool. We were adding 250k-300k per month in the 90s, and even just two years ago when the housing boom was in full swing the numbers were in the 175-225k.
So where are we? As the chart below shows, this remains one of the weakest post-recession job creation cycles in the post war era. And as we have seen over the past few quarters, even that modest pace of job creation is now decelerating."
See the chart at his site. It moves the starting point of the "recovery" to the end of the recession. It is a somehat gloomier picture than the first chart presented on this site. It also has a timeline that corresponds more to the timeline of the 2nd and 3rd chart in this post.
Also, with respect to comments in a previous post, it was noted by someone that 2/3 of hispanic immigrants went to work in the construction business (probably most in residential construction). That is a big number of displaced workers that will probably show up less in employment numbers but have more of an effect on retail sales (like at Walmart, which had disappointing sales).
The drop in non-residential construction employment will have more of an effect on mid and lower-upper range spending than the drop in residential construction. The pay rates of union construction workers has allowed for a major amount of discretionary spending, often spent on expensive new "toys". While these people will still have to dress and eat (maintaining sales at low end retailers), "toy" manufacturers and retailers, etc., all should experience a fall. Also in this range of spending were real estate agents, mortgage sales, etc..
Expect big retail drops in the next few months. It will be accelerated by rising gas prices.
Holden Lewis, I'm sure that is a factor (Gulf reconstruction), but those numbers are included in the housing starts / completion numbers - and I believe employment will follow completions (as it has in the past).
charts, if you see "goose eggs" or worse, you are in a recession. You will get no warning from this report. In fact you usually see the goose eggs in the downward revisions - I would completely ignore this report for forecasting.
jmf, once we strip out the government jobs (39K), we find that ADP did pretty well this time (57K vs. 58K).
That is interesting and worth watching.
Best to all.
OT: ams16, I forwarded your idea to Tanta - I think it's a great idea!
Best Wishes.
Work week fell to 33.7 hours.
Las Vegas is building casinos in reponse to the spenders of the last few years. What happens when the rest of economy, California especially, stumbles?
WRT unemployment rate, this is the only number typically headlined in the news, is it any wonder that it has stayed at record lows during a weak job market?
good point with the adp data!
but what is with this weird "birth death model"
this is a mystery to me.
"Las Vegas is building casinos in reponse to the spenders of the last few years. What happens when the rest of economy, California especially, stumbles?"
Perhaps free room offers if you only spend some time on the gambling floor?
Thanks for the clarification on goose eggs, CR.
Springtime is the season one usually associates with egg symbolism, perhaps we'll see some goos eggs crop up then.
The private sector job creation is looking weak.
jmf, the birth death model
is no big deal. Because companies are started (and fail) all the time, the BLS came up with a system to account for these companies. From the above link:
"There is an unavoidable lag between an establishment opening for business and its appearing on the sample frame and being available for sampling. Because new firm births generate a portion of employment growth each month, non-sampling methods must be used to estimate this growth."
Read the details. One of the biggest mistakes I see in discussions is mixing the Seasonally Adjusted (SA) headlines number with the Not Seasonally Adjusted (NSA) birth death number.
"Note that the the net birth/death figures are not seasonally adjusted, and are applied to not seasonally adjusted monthly employment links to determine the final estimate."
The model will cause the BLS to miss any turning points - and is one of the reasons this data series is useless for forecasting:
"The most significant potential drawback to this or any model-based approach is that time series modeling assumes a predictable continuation of historical patterns and relationships and therefore is likely to have some difficulty producing reliable estimates at economic turning points or during periods when there are sudden changes in trend."
Best Wishes.
ams16,
Maybe CR can charge a fee for the reference subscription...
Seriously, that's a great idea. I have just enough organic hard-drive space for FASB, SAB, SOP, EITF, etc.
CR,
I recollect from previous posts on this subject that the red line was trending in the middle of the grey range. What changed? Is it the time scale?
Just ask'
CR said: "...This is probably just the beginning of the loss of hundreds of thousands of residential construction jobs over the next year or so..."
Are you officially amending your previous forecast of 400k-600k residential construction jobs lost by July 2007, or are you sticking with it?
Sebastia
A bit from Kash's take on the report:
Hand-in-hand with weaker job growth comes weak earnings growth by workers, of course. To the $10 per week increase in take-home pay that the average production worker has received since the year 2000, in February they were able to add another $0.30. Unfortunately, that only made up for about half of the fall in average weekly pay that they took home in January
thanks.
that was the missing link.
hwo can the assume 118.000 this year in a slowing economy when the get to 116.000 last year when the economy looks much stronger than today.
so it should be clear that this years number is clearly an overstatement.
thanks!
Sebastian,
I see nothing regarding any type of forecast revision, official or otherwise, in CR's response. Why would you ask that? I hear a strawman creeping up here...
Sebastian, No change. You ask me this every month!
Best to all.
I strongly suspect that the upward adjustment based on state UI receipts incorporated from 2006 is on the way to reversing itself.
Unless, of course, you assume that the consumer suddenly stopped spending. This doesn't show up in other surveys, so....
I wonder how many illegal construction workers file unemployment claims? They are very unlikely to be picked up in the household survey.
Another discrepancy is between the Pew numbers on Hispanics and the Hispanic unemployment rate shown for BLS.
Theory one: Hispanics simply move to areas where there are these jobs. Theory two: we're missing a lot of unemployment due to the sampling methods.
If theory one is right, the state UI numbers should come in consistent with BLS. If theory two is right, the state UI numbers will come in below BLS, reversing last year's trend.
Impact on the resort real estate markets?
As a refugee from the Austin Dot-com shake out (now living in the mountains of southern NM), I'd like to know if there is any research on the impact of real estate reversals in "primary residence" markets on "resort properties"?
How long is the lag between a price correction in "primary residences" and vacation property price declines?
Do second homes suddenly get "dumped" all at once or do second homeowners generally have better "staying power" and the ability to ride out the storm?
-- Billy the Kid territory
I've published my take on jobs reports as well. It boils down to the fact that rate cuts the mental Cramer is salivating on are impossible until jobs cool down.
while of course it is possible that the US is about to enter a very difficult time i think too you need to consider that when construction is going full blast it is difficult to get anybody decent to do your bathroom or fix your roof. Once the better paid jobs ease then these guys begin doing the odd jobs or for example begin driving trucks.
The experience of the UK recently and that of Australia was that the world did not end as predicted .....instead it just paused and entered another phase
And it is worth considering that this year is forcast to be another "good" hurricane season so builders can look forwards to a great deal of rebuilding. If the forcasts are right then the storms will be much further north than in recent year and i imagine that equates to more damage or more repairs needed.
NM,
Here's an anecdote only. I live in a resort market. The adjoining residential part of this area is seeing the same downturns as other places. The resort area itself has slowed in terms of price growth and unit sales, but sales prices just aren't going down. Why? My suspicion is the these folks are so well heeled that they almost never have to sell, they will wait for their price.
Wages are also strong - up 4.1% YOY. - Steve
Yup and I don't think that was all 'Wall Street bonus' effect either (that was the complaint in December & January).
Again, not even close to recessionary. - charts
Another 'yup'... and no goose eggs in sight yet.
The private sector job creation is looking weak. - charts
But as we saw yesterday with weekly numbers, not a lot of evidence of accelerating job loss either... not much gain, not much loss. Is it the quiet before the storm or the quiet before the calm.
Who knows - I sure don't.
The Mess That Greenspan Made: Fewer Drywall Nailers, More Baristas
Good analysis from The Mess That Greenspan Made..."Fewer drywall nailers, more baristas"
Always appreciate your comments MOM, but this one
I strongly suspect that the upward adjustment based on state UI receipts incorporated from 2006 is on the way to reversing itself.
trying to push back at the benchmark revisions noted last Dec were based on tax receipts from employers, no? Or are we talking about different adjustments?
It seems to me what is hidden in those reports are the actual hours and therefore rates paid to illegal immigrants...not much different from the slaves that our media have no problem highlighting in the backwaters of Brazil.
Are you officially amending your previous forecast of 400k-600k residential construction jobs lost by July 2007, or are you sticking with it?
Obviously if there are "only" 300k jobs lost by July 2007 we will know that CR is a total fraud.
LOL
dilbert dogbert, the change is because of the large BLS revision last month. The BLS added a significant number of jobs in their annual revision.
Best Wishes.
Jmf,
In addition to our host's explanation of what the birth/death plug does, there is a simple fact about the use of the plug that should be kept in mind. It goes in before seasonal adjustment. The plug is of roughly the same magnitude each February, in the 100-120k range. Since it adds roughly the same amount each February, seasonal adjustment factors will pick it up and to a great extent, adjust it back out.
The rise in employment prior to seasonal adjustment in February, including the plug, was 705k jobs. In January there was a loss of 2.78 mln jobs prior to seasonal adjustment. Given swings of that magnitude in the NSA data, picking out the plug as a substantial factor behind the performance of the seasonally adjusted number doesn't make sense.
You are right that private hiring was soft, probably softer than expected by most forecasters who mostly had anticipated the reported job gain.
Charts,
Have to agree with our host. Employment data lag output growth, and lead inflation by a bit. If we wait to see zero job growth, we will very likely already be in recession. We can take some comfort from the fact that, if the economy should fall into recession, we will have a hard time knowing it based on just about any measure. We find out about recession after the fact, rather than before.
Neal,
Barry over at Big Picture is using the high end of estimates of trend-like employment growth in that 150k figure. The low end is in the 110k-125k range. When expansions are old, trend-like growth becomes harder due to shortages of workers in lots of categories. Fed officials anticipate between 70k and 100k new jobs per month, on average, this year. Figures like those would not necessarily lead the Fed to ease.
Yes - the state tax receipts. There was a very large adjustment there. The nature of much construction employment is hard to capture in establishment/household surveys. You have construction crews that travel across the country. For example, there's a construction company in Tifton, GA, that specializes in golf course work and employs almost entirely Hispanics.
No question that keeping workers illegal tends to make them vulnerable. I do think it is a deliberate and harmful strategy.
dryfly,
There are several surveys that even suggest job growth should be increasing.
-Hudson Index
-Monster.com Index
-CFO business outlook
-Business Roundtable - 2007 CEO Economic Outlook Survey
-And the two employment components of the ISM reports for February both increased.
I still think it's reasonable to expect lower job growth in the coming months (due to construction), but I don't see much suggesting any significant weakness in the overall labor market.
Here's the other two links. Haloscan wouldn't let me post all the links at once:
CFO business outlook
Business Roundtable - 2007 CEO Economic Outlook Survey
Job growth has been solid for the last two years and is near the top of the expected range.
Yeah, sure, how much of that is due to higher than usual government job growth? As jmf noted, that 40% masks significant private sector weakness.
CR, do you have charts detailing strictly private, non-farm growth going back 15 to 20 years?
This was supposed to be the weak ass month for employment and it still came in at a respectable level.
Outside of interest rate sensitive sectors, the US economy is booming.
For those interested in setting up a wiki, there are a number of places that will host it for you for free. Some examples (where you can go and set one up, some very simply) are PBwiki (pbwiki.com; I haven't tried it but it appears to be super-simple and very quick to set up) and Wikia (wikia.com, requires filling out a request form and satisfying some criteria).
ams16, I saw your post and I think it's an idea with some promise. Sorry I haven't responded to you, but I'm a little off today, and probably will be for a couple of days. The coffee just isn't winning the war against the medicine; at best it's a truce. So it's just taking me a lot longer to process information. Please don't feel ignored. I'll be back to my usual hyperdrive soon.
Banker:
Drop me a note and we'll compare notes.
mbyrnes@4wire.com
-- NM
I still think it's reasonable to expect lower job growth in the coming months (due to construction), but I don't see much suggesting any significant weakness in the overall labor market.
I agree Steve and I'm no perennial bull. I just don't hear of cut backs in many places OUTSIDE auto supply chain & construction. Maybe cuts in retail & financial services is coming but I haven't seen evidence yet.
Now in fairness I see the weakness everyone here sees too & the 'logic' behind why labor markets should be softer... but with the continuing carry trade & overall liquidity... how can one expect it to be soft yet?
And for those folks saying the carry trade is 'dead'... reminds me of what Mark Twain said about reports of his own death (i.e. they are 'exaggerated')... I'd say its premature to call the carry trade dead.
USD-JPY Charts... Click on the 5 day button. Yen is back to 118 & rising.
Take care Tanta. The 'work' can wait.
thanks k harris.
check out PBworks: PBworks Online Collaboration for free wiki creation and hosting. Created by our friend Ramit Sethi over at iwillteachyoutoberich.com
Tanta
Take care. This disaster will take a while to happen and will happen with or without your narrative.
But we need you for the long haul. I am sure more interesting times lay ahead.
CR,
Do you have any opinions on the difference between payroll employment and total employment?
Here are the seasonally adjusted figures for total employment:
Oct 06 145,337
Nov 06 145,623
Dec 06 145,926
Jan 07 145,957
Feb 07 145,919
The time stamp on your post is interesting. Kash leaves a comment under my post, which went up 11 minutes after the BLS release, as to how I was the early bird. But you post is time stamped two minutes before the BLS report was even released. Now did you beat me again - or has the daylight savings glitch already struck your computer?
Tanta - No worries. Feel better. That's much more important. And I wasn't expecting you to do the work, anyway. You already do too much.
As for the wiki, KMB pointed to some free sites. I'll check them out, and maybe set something up, for a trial. And put in some of the definitions I've gleaned over the past year and half. (I've been lurking for a while.)
(OT: Wikia is a new project by the Wikipedia founder.)
Thanks MOM. So IIRC that was an additional 1M as of Dec 06, but I have not seen how this was allocated to the various employment sectors. I did notice some ~10% wage gains attributed to q4 which were described as "bonuses" and I kind of think the Mexicans (why do we truck with "Hispanics" here people?) were not getting any of that.
Now about their exodus: is it because there are better economic opportunities in Mexico? Or are there non-construction sectors that can feel some pressure from an under-paid semi-skilled work force?
I suppose we know if the economy is really growing if that exodus materializes.
1M is about 3X the usual benchmark adjustment, but it doesn't reflect even the magnitude of the reported 12M illegal aliens...and for some, this makes the accuracy of so many recent stats (not just employment) troublesome.
Turning a blind eye to a few matters often enough may have more serious consequences than not being sure if the UE rate is 4.5% or 4.6%.
Tanta: Maybe this report will be fun to read all doped up.
Understanding the Evolving Inflation Process
This temporal clustering narrows the set of G-7-wide economic developments which could have triggered the excessive monetary policy accomodation that was the ultimate source of the Great Inflation.
...
In a similar vein, De Long argues that a postwar Great Inflation was virtually inevitable in the United States, because there was no political consensus to tolerate the sustained high unemployment needed to combat inflation until inflation had proved sufficiently disruptive.
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Only Bloomberg seems to have this:
General Electric's WMC Mortgage Cuts Subprime Jobs
By Jody Shenn
March 9 (Bloomberg) -- General Electric Co.'s U.S. mortgage unit will curtail lending and fire 460 workers, or 20 percent of staff, amid a rise in defaults by people with poor credit.
GE's WMC Mortgage, the fifth-biggest subprime lender in the U.S., this week stopped making mortgages without down payments or to borrowers with credit scores below 600. WMC last year had $33 billion in new loan volume, according to industry newsletter Inside B&C Lending.
"Y'all want fries with that?"
CR, please consult the 3/9 post on the BLS Feb. Job/Employment report at the following link:
Mish's Global etc.
... and then reconcile with the following comments from your 3/9 post:
"Job growth has been solid for the last two years and is near the top of the expected range..... Overall this is a solid report."
I think both you, CR, and Mish are very good analysts, so I'm just curious about today's fairly glaring discrepancy between the two of you. I'd appreciate your comment, CR.