Moving the Goalposts: Fugly NFP

Friday, September 01, 2006 | 10:25 AM

The Human capacity for self-delusion never ceases to amaze. If you ever hear me spouting the same sort of $%#* I heard on CNBC at 8:31am, grab me by the lapels, throw a glass of water in my face, slap me HARD across the face, and yell "WAKE UP MAN, YOU'RE DELIRIOUS!"

How this month's NFP was labelled "perfect" is simply beyond my ken. The only rational explanations I can think of are an unwitting influx of Psylociben or perhaps blunt head trauma. Steve Liesman was the notable exception, as he came away rather unimpressed with the data.

Let me say the nicest things I can say about NFP first: it was consistent with consensus expectations of Wall Street economists. The prior two months were revised higher, and the the unemployment rate fell slightly. Business and professional services companies' payrolls rose 26,000. Commercial construction added 17,000 (4,000 from residential!), making up for some of the losses in Home Sector (including residential building, real estate agents, mortgage brokers, contractors, etc.).

Beyond that, the details of the report are just fugly (citations in parens):

- The mix of job growth remains skewed toward low-paying industries;

- Weakness is most evident in the retail component -- which has stopped growing;

- Almost one-half of the rise occurred in the health and social assistance category -- generally low-paying jobs;

- Other sectors have not picked up the slack
(Joshua Shapiro, MFR);

- The pace of job creation has slowed dramatically.

2004: 175,000/mo
2005: 165,000/mo
2006: 140,000/mo
Past five months: 119,000/mo 
(Steven A. Wood, Insight Economics)

- Manufacturing has lost more than three million jobs since 2000; Conditions remain poor;

- Prior recoveries at this point had created two million manufacturing jobs;

- Unemployment fell to 4.7 from 4.8% due to a large number of adults leaving the labor force (NiLF);

- The two-tiered labor market continues: The top quartile has it good; but for everyone else, the future is worrisome;

- For many workers, real incomes lag inflation;
(Peter Morici, Univ. of Maryland)

- Total labor input is growing very sluggishly in Q3, foreshadowing the continued softness in economic growth.
(Steven A. Wood, Insight Economics)

- The average work week is dropping (by 0.1 hours to 33.8 hours), even as productivity slows.

Want to have a clue as to how absurd things have gotten in the NFP land? Consider the recent discussions amongst the Dismal set as to how many jobs are needed just to keep up with population growth. Justin Lahart has the skinny in today's Ahead of the Tape column:

"But there is a growing debate among economists about just how many jobs the economy needs to produce. The old rule of thumb used to be that the economy needed to produce as many as 180,000 jobs per month to keep up with new entrants into the labor force. But the labor force isn't growing as fast as it used to -- more people have gone back to school, retired early, or just quit looking. As a result, economists at the Kansas City Fed have argued only 120,000 jobs a month are needed to create jobs for would-be workers. In a speech last week, Chicago Fed President Michael Moskow put the number at 100,000."

Think about what that suggests as a population growth rate In a nation with 300 million people. Not only have the NiLFs -- Labor Force dropouts -- made the unemployment rate look better than it is, the same drop outs have convinced Fed Governors that less new hires are neccessary for "mere zero growth."

In other words, since the data isn't there to support proof that we are merely treading water at best, then let's change the basic requisites. I call that Moving the Goalposts.

This country is in for a very rude awakening.

<rant mode off>


Nonfarm Payrolls Grow by 128,000;
Unemployment Rate Drops to 4.7%

WSJ, September 1, 2006 9:31 a.m.

Data Deluge
WSJ, September 1, 2006; Page C1

Steady, Modest Job-Growth Pace Points to Fed Pause This Month
Compiled by Tim Hanrahan
WSJ, September 1, 2006 10:34 a.m.

Friday, September 01, 2006 | 10:25 AM | Permalink | Comments (75) | TrackBack (2) add to | digg digg this! | technorati add to technorati | email email this post



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Oh oh. Luckily, I wasnt watching CNBC when the non-farm payrolls came out this morning. I was out for my morning walk, figuring the market would find some way to turn any number into good news - thats just the way its been lately... [Read More]

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One thing that seemed rather odd was that jobs in residential construction and real estate supposedly increased slightly. Why are there more people employed building houses when new home construction is down 20%? Or selling them when sells are down 10%

Whatever the reason for it, the job loss from the housing slowdown is all yet to come (or be apparent.)

The WSJ had another article on banks exposure to real estate today. I bought more WM puts. ;-)

Posted by: Bob_in_MA | Sep 1, 2006 10:38:23 AM

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