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NFP December 2007

Friday, January 04, 2008 | 07:26 AM

Once more unto the breach . . .

This morning is the "all-important" December 2007 Non-Farm Payroll reports. Bloomberg's survey of 74 economists expects payrolls to rise by 70,000, with the jobless rate increasing a tick to 4.8%.

I put "all important" in quotes, because, as regular readers of The Big Picture well know, we look at this report quite askance, given how unreliable the initial numbers are.

Indeed, today, we get the revisions covering the last five years of data for the household survey which measures the unemployment rate. (The full benchmark revisions for the establishment NFP data is next month).

It has been my position that the increasing proportion of Birth Death jobs as a total percentage of NFP has rendered the BLS data meaningless. The straight line extrapolation of the B/D adjustment is, by design, unable to catch any change in economic direction. Hence, the absurd determination that 199,000 small business construction jobs have been created since January 2007.

Consider: The B/D generated 1,239,000 jobs from February thru November 2007. That's rather surprising, since the total NFP jobs created since January 2007 was 1,208,000. In other words, the Net Birth/Death jobs created over 10 months was actually greater than the total NFP jobs created in all of 2007. That's rather odd, don't you think?.

There are still some stalwarts and innumerics who contest this issue, but I find that data point rather convincing.

The BLS NFP Birth/Death adjustment is the statistical equivalent of CDO pricing via mark-to-model. The idea is to approximate an unknown variables value as close to possible via measurements. The mark-to-model method is deeply, inherently flawed.

When we look at some other measures of employee/consumer strength -- Late payments on loans hit a post-2001 high and Consumer Bankruptcy Filings Rose 40% in '07 -- it makes us question any number claiming broad job creation . . .

Sources:
Hiring in U.S. Probably Slowed in December, Unemployment Rose
Bob Willis
Bloomberg, Jan. 4, 2007
http://www.bloomberg.com/apps/news?pid=20601068&sid=a4Vujb8Xyfhk&

Late payments on loans hit a post-2001 high
Associated Press,January 4, 2008 http://www.boston.com/business/globe/articles/2008/01/04/late_payments_on_loans_hit_a_post_2001_high/

Consumer Bankruptcy Filings Rose 40% in '07
WSJ, January 4, 2008; Page A4
http://online.wsj.com/article/SB119940365489166213.html

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» NFP = 18,000 from The Big Picture
Wow, that's a pretty ugly chart above. Here are the details, via BLS:The unemployment rate rose to 5.0 percent in December, while nonfarm payroll employment was essentially unchanged ( 18,000), the Bureau of Labor Statistics of the U.S. Department of L... [Read More]

Tracked on Jan 4, 2008 10:02:51 AM