NFP: 88k (and I don't believe even that)
The Payroll numbers are out, and they are not particularly pretty:
88,000 new jobs were created in April, according to BLS. This is the weakest job gain since November '04. Cumulative revisions for prior months were to the downside by 26,000.
As expected, losses were in Manufacturing (19k), Retail (26k) and Construction (11k). The weakness in Construction has been very uted, implying that the full impact of the housing slow down has yet to be fully realized.
Biggest gains were had in Services (116k), Education and Health (53k), Gov't (25k) Professional (24k) and Leisure/Hospitality (22k).
Temporary help jobs fell for a 3rd month (January was flat) making 4 consecutive months of no gains. Temp help tends to lead employment gains, and this weakness can be read as a future forecastor of employment.
We don't pay close attention to the Household survey, (the self reported number is very volatile) but the drop of -468k was an eyebrow raiser.
~~~
Birth Death Adjustment: A whopping 317k B/D adjustment -- that is the single largest "adjustment" on record for any single given month. And despite that giant add, the number was a very soft 88k.
To put this into some context, of those 317k new jobs hypothesized by BLS, 49k of those supposed jobs are in construction. Now what are the odds of that?
While Wall Street celebrates the upcoming recession, let me remind you that this economy requires about 150k new monthly jobs to merely keeep up with population growth.
April 2007
BLS
Table A. Major indicators of labor market activity, seasonally adjusted
(Numbers in thousands)
_______________________________________________________________________________
| | |
| Quarterly | |
| averages | Monthly data |
|_________________|__________________________| Mar.-
Category | | | | Apr.
| 2006 | 2007 | 2007 | change
|________|________|__________________________|
| | | | | |
| IV | I | Feb. | Mar. | Apr. |
________________________|________|________|________|________|________|________
|
HOUSEHOLD DATA | Labor force status
|_____________________________________________________
| | | | | |
Civilian labor force ....| 152,425| 152,912| 152,784| 152,979| 152,587| -392
Employment ............| 145,629| 146,044| 145,919| 146,254| 145,786| -468
Unemployment ..........| 6,797| 6,869| 6,865| 6,724| 6,801| 77
Not in labor force ......| 77,471| 77,927| 78,050| 78,055| 78,666| 611
|________|________|________|________|________|________
|
| Unemployment rates
|_____________________________________________________
| | | | | |
All workers .............| 4.5| 4.5| 4.5| 4.4| 4.5| 0.1
Adult men .............| 3.9| 4.1| 4.1| 4.0| 4.0| .0
Adult women ...........| 3.9| 3.9| 3.8| 3.8| 3.8| .0
Teenagers .............| 15.1| 14.8| 14.9| 14.5| 15.3| .8
White .................| 3.9| 4.0| 4.0| 3.8| 3.9| .1
Black or African | | | | | |
American ............| 8.5| 8.1| 7.9| 8.3| 8.2| -.1
Hispanic or Latino | | | | | |
ethnicity ...........| 4.8| 5.4| 5.2| 5.1| 5.4| .3
|________|________|________|________|________|________
|
ESTABLISHMENT DATA | Employment
|_____________________________________________________
| | | | | |
Nonfarm employment.......| 136,951|p137,448| 137,419|p137,596|p137,684| p88
Goods-producing (1)....| 22,539| p22,507| 22,465| p22,501| p22,473| p-28
Construction ........| 7,691| p7,683| 7,641| p7,691| p7,680| p-11
Manufacturing .......| 14,147| p14,113| 14,113| p14,095| p14,076| p-19
Service-providing (1)..| 114,412|p114,941| 114,954|p115,095|p115,211| p116
Retail trade (2).....| 15,316| p15,373| 15,365| p15,397| p15,371| p-26
Professional and | | | | | |
business services .| 17,727| p17,830| 17,840| p17,846| p17,870| p24
Education and health | | | | | |
services ..........| 18,019| p18,142| 18,138| p18,187| p18,240| p53
Leisure and | | | | | |
hospitality .......| 13,318| p13,422| 13,425| p13,445| p13,467| p22
Government ..........| 22,107| p22,169| 22,174| p22,194| p22,219| p25
|________|________|________|________|________|________
|
| Hours of work (3)
|_____________________________________________________
| | | | | |
Total private ...........| 33.9| p33.8| 33.7| p33.9| p33.8| p-0.1
Manufacturing .........| 41.1| p41.0| 40.9| p41.2| p41.1| p-.1
Overtime ............| 4.2| p4.2| 4.1| p4.3| p4.2| p-.1
|________|________|________|________|________|________
|
| Indexes of aggregate weekly hours (2002=100)(3)
|_____________________________________________________
| | | | | |
Total private ...........| 106.5| p106.8| 106.4| p107.3| p106.9| p-0.4
|________|________|________|________|________|________
|
| Earnings (3)
|_____________________________________________________
Average hourly earnings, | | | | | |
total private .........| $17.00| p$17.16| $17.16| p$17.21| p$17.25| p$0.04
Average weekly earnings, | | | | | |
total private .........| 575.73| p579.90| 578.29| p583.42| p583.05| p-.37
_________________________|________|________|________|________|________|________
1 Includes other industries, not shown separately.
2 Quarterly averages and the over-the-month change are calculated using
unrounded data.
3 Data relate to private production and nonsupervisory workers.
p = preliminary.
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Comments
by the way cnbc reports you would think that we were all on oprah and about to get a new new grand prix!
this american experiment is the biggest sale in the history of the world.
Posted by: erik | May 4, 2007 9:58:38 AM
I did not see the B/D adjustment in the press release. Where can I find that number?
Also, I do not understand the reference to 150k jobs being necessary to keep up with population growth. Multiplying payroll employment (137.684 million) by monthly population growth (0.08 percent) gives 110k jobs.
Posted by: lowsmoke | May 4, 2007 9:59:01 AM
With the ADP number tracking the BLS number so closely this month, does anyone know if
(a) the ADP number is trying to predict the BLS private-sector number, or
(b) the ADP number is trying to reflect actual private-sector payroll?
If the latter, wouldn't that tend to give the BLS number a bit more street cred?
Posted by: wyler | May 4, 2007 10:05:07 AM
The actual number doesn't matter.
Bellow consensus-> low inflation, rate cut (growth? who cares)
Above consensus-> economy is booming (inflation? pfft)
We are at the crossroads were Goldilocks meets Pollyanna.
Posted by: mhm | May 4, 2007 10:16:08 AM
So when does bad news acutally affect the market or is it always poor economy means stock market goes up cause "rate cuts" could happen
Posted by: costa | May 4, 2007 10:25:55 AM
CNBC commentary was spot on this morning.... If the NFP numbers comes in a high then it a non-even for the market; if it comes is low? oh, that's a non-event as well.
Posted by: Terry | May 4, 2007 10:31:16 AM
Wishful Thinkers'
``Wall Street has been full of wishful thinkers thinking if only Bernanke would lower interest rates,'' said Samuelson, a professor emeritus at the Massachusetts Institute of Technology, in an interview from Florida. ``Well he's not going to do it. He would lose his credibility if he did.''
Posted by: Philippe | May 4, 2007 10:35:42 AM
"88,000 new jobs were created in April, according to BLS. This is the weakest job gain since November '04..."
Sorry, I'm not seeing how you got there. I'm looking at my spreadsheet and there were 86,000 new jobs created in October, 2006 and 37,000 in October, 2005. Did I miss some revisions or something?
Sebastian
Posted by: Sebastian | May 4, 2007 10:38:43 AM
costa,
All news is good news. All markets are bull markets.
Didn't you get Bernanke's memo? It was printed on hundred-dollar bills...
Posted by: John | May 4, 2007 10:53:38 AM
M2 growth running well above economic growth. Coincidently, the pickup in money growth happened at the same time as B-52 Bernanke taking office. He is giving us all a gift by reflating the economy. He and the likes of Janet Yellen will go down as those who failed to learn from the lessons of history and eased policy in the face of rising inflationary pressures.
Posted by: js | May 4, 2007 11:16:37 AM
M2 growth running well above economic growth. Coincidently, the pickup in money growth happened at the same time as B-52 Bernanke taking office. He is giving us all a gift by reflating the economy. He and the likes of Janet Yellen will go down as those who failed to learn from the lessons of history and eased policy in the face of rising inflationary pressures.
Posted by: js | May 4, 2007 11:18:05 AM
Around Sacramento, all housing payroll growth was undocumented workers, now that the "bust" is here, there has been no job loss at all....
Posted by: patski | May 4, 2007 11:19:59 AM
i get pretty conflicted as a trader (albeit a flawed on) due to my skepticsm of this market. however, i put most of the strength of this tape in the corner of paulson and bernanke. where do you think we would be if john snow was still in the treasury?
as for bernanke not heeding histories lessons, i think he knows the score and will choose the right path in the long run. so much of his academic work was studing the great depression. i find it hard to believe he would make the same mistakes.
Posted by: erik | May 4, 2007 11:24:08 AM
marc faber wrote an article in june 2003 reprising an italian economist's review of weimar germany. stocks soared as the currency declined, perhaps similar to what is currently occurring in zimbabwe. can china and asian dollar bagholders take dollar collapse as the endgame to "reflation"?
Posted by: ferd mertz | May 4, 2007 11:32:22 AM
Sebastian,
Yes you got bit by the revisions. October 2006 was first released at 92, then 79, then 86 and now its 109
October 2005 was revised up to 107.
BLS had a big nearly 1 million upward revision earlier in the year and both these months got goosed. I suspose the big upward revision is why the Birth / Deaths are a little more generous than usual, they don't want to get caught again.
That said, there is no way there is a positive B/D going on in Construction right now.
mike
Posted by: Michael Donnelly | May 4, 2007 11:33:18 AM
erik, I think you hit the nail on the head. Bernarke is making us all realize just how bad Greenspan really was. I mean, the way Greenie kept inflating the dot.com bubble stocks with low rates, only to pop them at the absolute worst moment in time (March 2000).
For those who think this is a bubble, explain all the M&A activity. We have had some really large cap companies whos stock hasn't moved in 6 - 7 years (MSFT, INTC, GE, J&J, CITI, etc.). The list goes on and on. Now, I hold a ton of Yahoo and it has been a dog. But, all the while they were piling up earnings, buying back stock, and generating huge amounts of cash flows. There stock has been stuck in never-land for a long time. It was ripe to be bought. Many large cap stocks are very cheap and that is what is fueling this M&A activity and moving the market higher. Liquidity folks. Cash has been stored for 7 years. It is now being put to work.
Posted by: Jdamon | May 4, 2007 11:36:00 AM
I cannot fathom how we are not in economic contraction already, and perhaps down the road revisions will show this to be true.
I think we are in the last 3-6 months of this bull's life cycle, and how ugly it gets then is the square of how much resistance is created tying to avoid the inevitable.
Posted by: Winston Munn | May 4, 2007 11:38:42 AM
jdamon,
i would definitely argue it's a bubble, just not the same bubble as the 2000 market. this time it's a credit bubble and it will burst all the same.
as for large caps being cheap and the reason for the m&a, are you serious?
hey, i have this bridge for sale, any takers?
Posted by: erik | May 4, 2007 11:40:57 AM
wyler,
The ADP report is designed to predict the BLS number.
Posted by: Steve | May 4, 2007 11:48:58 AM
erik, explain how the companies I listed aren't cheap on any valuation basis you want to use. Give it a try.
Remember, it is better to be wrong and make money and right and not making money.
I agree that we are having an economic contraction. I agree there were people who will be hurt by the housing markets contraction. I just don't think housing and housing alone will wipe out the economy. Will it slow it down, yes, wipe it out altogether no.
Explain to a layman what a "credit" bubble really is. Have we ever had one before and what did the market do. That is the analysis that would be relevent now.
Posted by: Jdamon | May 4, 2007 12:11:11 PM
Jdamon, a credit bubble is a "thing" where even an unemployed, incomeless, assetless person can borrow a couple of million dollars.
And you had one, up until the 2nd half of 2006.
And there's no way it's going to pop without consequences.
Any doubts?
Posted by: Incognitus | May 4, 2007 12:21:56 PM
js wrote: "...B-52 Bernanke..."
Did you mean "Blackhawk Bernanke"?
Posted by: sn | May 4, 2007 12:46:37 PM
sn,
He has been renamed B-52 Bernanke by Bill Fleckenstein
http://articles.moneycentral.msn.com/common/contributors.aspx#Fleckenstein
This stock market PE looks cheap only compared to historically low bond yields. Of course, the Asian central banks have a lot to do with that (even Bernanke wrote a paper about this).
Credit expansion has exploded after he stopped raising rates last year. How have the monetary conditions tightened except for lenders refusing loans to high risk sub prime type people. This Fed is far away from even keeping the money growth at a neutral level.
It ended badly in Japan, it ended badly for stocks in 2000-2002 and it will end badly for those that took out all the debt in the near future. Problem is pinpointing how long the party keeps going.
Posted by: js | May 4, 2007 1:04:07 PM
http://moneycentral.msn.com/content/P133918.asp?Printer
You will note that I have upgraded his dollar-bill-spewing helicopter to a B-52, as he's going to need a whole squadron of something more powerful somewhere down the road.
Posted by: js | May 4, 2007 1:08:07 PM
Barry
In your entry of Tuesday, March 30, 2004 entitled "Resolving the Controversy between Payroll and Household Surveys" you discuss adjustments to the household survey to create results comparable to those of the establishment survey. Is a series incorporating those adjustments to more recent data available from the BLS?
Posted by: Steve Pilon | May 4, 2007 1:31:43 PM
