NFP: much ado about very little
The dismal set has gotten all hot and bothered over the preliminary ADP data, thought by some to be an early read on the NFP report. According to National Employment Report from Automatic Data Processing, the "private sector added a seasonally adjusted 368,000 nonfarm jobs in June."
It turns out that the ADP data is compiled, seasonally adjusted, and massaged in a very different manner than BLS does.
Regardless, its actually much ado about very little. Although NFP is eagerly awaited each month by wonks of all stripes (present company included) today's number is unlikely to represent a significant departure from the well established trend that has developed since the 2001 recession ended.
One point does not a trend make. And even if today is a killer number, we have seen what's been in place for nearly 5 years -- and it has been none too encouraging.
Why? The simple fact is that this recession recovery cycle has been historically very weak in terms of private sector job creation. Indeed, depending upon how you measure it, this is the first or second worst cycle since WWII.
The present cycle is overly dependent on government jobs. Its seen a hugely disproportionate number of private sector employment overly Real Estate reliant. These positions are more the product of government stimulus -- i.e., ultra low rates -- than they have been of an organic nature. Further, many of the remaining non real estate jobs have been disproportionately of the lower paying / weaker benefit variety than the jobs they are replacing.
And as the recent spate of layoffs in construction, mortgages, and real estate brokerage reveals, as rates rise the new jobs turn out to be somewhat more temporary in nature than originally believed.
So regardless of the outcome of today's report, it is but one number in an ongoing series. And the prior series has been rather disappointing from a macro perspective.
Prior to the ADP report's release, the consensus was for 170,000 nonfarm jobs; that's now been bumped up to 200k.
I'm sticking with the under.
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» NFP: Another in a long series of disappointments from The Big Picture
As we expected, yesterday's NFP was another stinkeroo. The 121k number was significantly below the 200k consensus, and far, far away from some of the myopically optimistic upside outliers. Let's delve beneath the surface a bit, first via Abelson:As Phi... [Read More]
Tracked on Jul 8, 2006 8:12:54 AM
Posted by: Brian | Jul 7, 2006 8:31:35 AM
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