NFP: Another in a long series of disappointments

Saturday, July 08, 2006 | 08:02 AM

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 Barron's Alan Abelson:

"As Philippa Dunne and Doug Henwood, our favorite parsers of the monthly employment reports, put it: "This was a weak report, with few signs of strength under the surface." They note that the 121,000 slots added brought the average monthly gain in the second quarter to a meager 108,000, sharply below the first quarter's 176,000 and even more sharply below the long-term average of 236,000.

A full 25% of the gain was from government hiring, mostly local and state . . .

A good chunk of the 75,000 new jobs from private services were from health care and the bar and restaurant sector. That prompts our jolly duo to speculate that "maybe our new economic model is one in which vigorous eating and drinking inspire a lot of doctor visits, which reinvigorate us for a fresh round of eating and drinking." We'll drink to that.

Unemployment held steady in June, at 4.6%. But a glance at the data in the report reveals the percentage of people who want a job but can't get one edged up to 5.8% of the labor force from 5.3% in May. If you toss in the number of folks who work part time even though they'd rather be working full time, the percentage rises to 8.7%, from 7.9% the month before." (emphasis added)

So not only was the top line poor, but the data points touted as strong -- primarily, the low unemployment number -- was lousy also.

Jared Bernstein of EPI provides some insight into why employment growth has been slowing:

"An important hint from today's report, for example, shows that employment in residential construction fell 6,800 over the past two months, the sector's first back-to-back monthly losses since the spring of 2001. Thus far this year, residential construction employment is up 7,000, compared to an increase of 20,000 over the same six-month period last year. And while employment in real estate was up 5,000 last month, job growth among credit intermediaries and insurance carriers—so-called "downstream industries" from the housing sector—has been notably flat over the past few months. In other words, there are many connections between the housing sector and other sectors in the job market, and the cooling of that sector has far-reaching implications."

Regular readers of The Big Picture will no doubt recognize this line of thinking.

The bottom line is that this cycle -- artificially driven by government stimulus -- is coming to the end of its unnatural life.  Look for a return to the prior period of flat growth and even weaker job creation -- at least until the next round of Rate Cuts restarts the real estate machinary . . . 


>


Sources:
Get Shorty
ALAN ABELSON
UP AND DOWN WALL STREET 
Barron's MONDAY, JULY 10, 2006   
http://online.barrons.com/article/SB115231256503801178.html

Slow job growth in second quarter reflects pace of overall economy
Jared Bernstein with research assistance from Yulia Fungard
EPI, July 7, 2006
http://www.epi.org/content.cfm/webfeatures_econindicators_jobspict_20060707

NFP: much ado about very little
The Big Picture, Friday, July 07, 2006 | 06:45 AM
http://bigpicture.typepad.com/comments/2006/07/nfp_much_ado_ab.html

Saturday, July 08, 2006 | 08:02 AM | Permalink | Comments (41) | TrackBack (3)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

bn-image

TrackBack

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8341c52a953ef00d8342a2aea53ef

Listed below are links to weblogs that reference NFP: Another in a long series of disappointments:

» NFP: Another in a long series of disappointments from A Dash of Insight
Alan Abelson discussed yesterday's employment report, quoting Dunne and Henwood of The Liscio Report in his Barron's column. The analysis is so misleading that I could have used it as an example in my stat class in the old days. [Read More]

Tracked on Jul 8, 2006 9:07:06 PM

» Employment Report Disappointment (??) Part 3 from A Dash of Insight
My biggest objection to the analysis in today's Barron's is the most difficult to prove in a conclusive fashion. I must add it to the score of projects that would make a good Master's thesis. But anyway, here it is. [Read More]

Tracked on Jul 8, 2006 9:08:10 PM

» NFP: Another in a long series of disappointments from A Dash of Insight
Alan Abelson discussed yesterday's employment report, quoting Dunne and Henwood of The Liscio Report in his Barron's column. The analysis is so misleading that I could have used it as an example in my stat class in the old days. [Read More]

Tracked on May 7, 2007 2:02:23 PM

Comments

Does anyone know the background of these people that Barrons' Ableson references ? Are they the best and brightest on Wall Street or Academia ?

Posted by: prw | Jul 8, 2006 8:40:03 AM

The comments to this entry are closed.



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner