The Big Picture

« FT: John Authers on Correlation Across Markets | Main | NonFarm Payroll: -80,000 »

Negative NFP Expectations

Friday, April 04, 2008 | 06:58 AM

A few quick thoughts on this morning's NFP data:

Today's number has a consensus forecast of minus ~~70k~~ 50k, but as we've stated ad nauseum, a single data point matters much less than the overall trend. And as anyone who looks at the numbers knows, the trend has been down.

Secondly, Vince Farrell mentioned on K&Co. Tuesday that the 2001 recession saw 200k job losses every month, arguing that since we've been nowhere near those numbers, ipso facto there is no recession.

The problem with this analysis is the difference in job creation between the 1994-2000 versus the 2003-08 cycle.

We regularly produced 300-400k monthly new jobs during the 1990s boom. The current backwards, cheap money, real estate-driven cycle has produced the least amount of jobs of any recession-recovery period post WWII.

Chart courtesy of Spencer England's Economic Review (SEER)

>
Its no surprise that very weak job creation would not generate the sale sort of recessionary layoffs we saw after a much bigger jobs boom.

Lastly, the ADP data: The WSJ reports this morning that since November, ADP has been off by over 100K jobs per month. One possible explanation I have read elsewhere (the Liscio report?) is that of all of the non-government jobs, over 20% have come from government contractors and defense department outsourcing.

As we know, what the government does is not reflective real world economic conditions, so perhaps that is skewing the ADP data.

~~~

Bottom line: The trend is not friendly. Look for ongoing weakness, regardless of todays soon to be revised, B/D skewed release.

UPDATE: April 4, 2008, 9:14am

March Payrolls fell a greater than expected 80k, 30k more than expected. The unemployment rate rose to 5.1% from 4.8%, the highest since post-Katrina Sept '05.

After falling a sharp 450k in Feb, the labor force rose by 410k. Net revisions were negative by 67k so job losses have averaged 77k over the past 3 months.

Net-net, the data speaks for itself and follows what is most rational on the part of business, tighten the belt when things are slow.

Source:
Job Market Hints Recession Has Started
SCOTT PATTERSON
WSJ, April 4, 2008; Page C1
http://online.wsj.com/article/SB120727884267588801.html