"The Bureau of Labor Statistics issued its monthly Employment Situation report this morning,"

From Bespoke:

"December Employment Report Inline With Expectations

Isn't it ironic that ahead of an employment report where the range of forecasts was wider than any other time in recent memory, the actual number of jobs lost was closer to the consensus forecast than any other time in recent memory? Today's non-farm payrolls report showed that the US economy lost 524,000 jobs in December versus forecasts for a decline of 525,000 jobs. Today's difference was only one thousand jobs. While usually the difference between the actual and consensus forecast is measured in the tens of thousands, today's difference was only 1,000.

The charts below highlight some of the key employment measures in today's report, and how the current levels compare to historical levels. The first chart shows the year/year change in non-farm payrolls. As shown, we are currently at levels not seen since the 1982 recession. With the large drop in payrolls, the unemployment rate rose to 7.2%, which is the highest level since shortly after the 1990 contraction.

The average work week also showed a noticable drop with a decline of 0.2 hours (from 33.5 down to 33.3). Before reading too much into this, however, it's important to remember that this indicator has been in a steady decline since the 1960s. This morning on CNBC, one commentator suggested that the new low in this reading was an ominous signal for the economy. However, this indicator has been hitting new lows for the last fifty years! We know it's bad out there, but the US economy has not been on the decline for the last half century. Finally, for people that are working, the year/year change in average hourly earnings ticked higher in December. So while employees are working less, at least they're earning more for the time they put in( BECAUSE DEMAND IS HIGHER THAN THESE LAYOFFS WARRANT. I'M NOT SAYING THAT DEMAND HASN'T BEEN HIT, BUT THAT THE FEAR AND AVERSION TO RISK BECAME A PROACTIVITY RUN IN THE SECOND HALF OF NOVEMBER. THAT'S WHY WE NEED A STIMULUS FROM THE SPENDER OF LAST RESORT. ).( AND THEIR BUYING POWER HAS INCREASED. )

The above charts are part of the "Economic Indicator" section of The Bespoke Report: 2009, which will be emailed out to subscribers this evening. To receive your copy, subscribe to Bespoke Premium today."

From EconomPic Data:

"Unemployment Way Worse than 7.2% Due to Birth / Death Adjustment

The Birth Death Model once again overstates employment. In other words, things are a lot worse than the 7.2% rate presented to us. Per The Big Picture:

Since 2003, the B/D adjustment has been part and parcel to BLS' Current Employment Statistics (CES) program, the official measure of US employment. In brief, the Birth Death adjustment imagines (hypothesizes) how many jobs were created by companies too new and/or too small to participate or be found by CES. The model attempts to create what is perceived as a BLS error at the start of any recovery, when many new jobs are created but missed by BLS.

Does anyone think small businesses have really added 53,000 jobs to the financial sector over the past 12 months (and 18,000 last month)? Get ready for a severe reaction next month when it snaps back (the annual correction to the B/D figure is made in January's release - coming in February).



Source: BLS"

And here:

"Less Educated Hurt More... Everyone Unemployed Longer ( EASIER TO LAY OFF ) (NOTICE THE 5 TO 14 WEEKS DATA SUPPORTING MY BELIEF THAT THE PROACTIVITY RUN BEGAN SIX TO EIGHT WEEKS AGO. )

Source: BLS

Posted by Jake at 6:10 AM

And here:

"Employment Recap

Phew... I think my unemployment analysis is over. Here is a recap:

Less Educated Hurt More... Everyone Unemployed Longer
Employment Breakdown (December)
Unemployment Way Worse than 7.2% Due to Birth / Death Model
Broader Unemployment to 13.5%

Posted by Jake at 6:13 AM 0 comments

From Calculated Risk:

"Employment Declines Sharply, Unemployment Rises to 7.2 Percent

by CalculatedRisk on 1/09/2009 08:30:00 AM

From the BLS:

Nonfarm payroll employment declined sharply in December, and the unemployment rate rose from 6.8 to 7.2 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employment fell by 524,000 over the month and by 1.9 million over the last 4 months of 2008. In December, job losses were large and widespread across most major industry sectors.( THIS BREADTH IS EVIDENCE OF A PROACTIVITY RUN. ALMOST ALL EMPLOYERS ARE TAKING PROACTIVE ACTION, DESPITE WHERE THEIR BUSINESS ACTUALLY STANDS AT THIS MOMENT. )

Click on graph for larger image.

This graph shows the unemployment rate and the year over year change in employment vs. recessions.

Nonfarm payrolls decreased by 524,00 in December, and November payrolls were revised down to a loss of 584,000 jobs. The economy has lost over 1.5 million jobs over the last 3 months alone! ( PROACTIVITY RUN )

The unemployment rate rose to 7.2 percent; the highest level since January 1993.

Year over year employment is now strongly negative (there were 2.6 million fewer Americans employed in Dec 2008 than in Dec 2007). This is another extremely weak employment report ... "

And here:

"Over 8 Million Part Time Workers

by CalculatedRisk on 1/09/2009 09:01:00 AM

From the BLS report:

In December, the number of persons who worked part time for economic reasons (some-times referred to as involuntary part-time workers) continued to increase, reaching 8.0 million. The number of such workers rose by 3.4 million over the past 12 months. This category includes persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full-time jobs.

Click on graph for larger image.

Not only has the unemployment rate risen sharply to 7.2%, but the number of workers only able to find part time jobs (or have had their hours cut for economic reasons) is now over 8 million.

Of course the U.S. population is significantly larger today (about 305 million) than in the early '80s (about 228 million) when the number of part time workers almost reached 7 million, but the rapid increase in part time workers is pretty stunning. ( EVIDENCE OF A PROACTIVITY RUN. LOOK AT THE RISE IN THE GRAPH. )"

From Real Time Economics:

"Employment and Recession: More Job Losses to Come

As the employment situation continues to deteriorate and the recession deepens, the Federal Reserve Bank of Minneapolis has released a set of charts that put the current downturn into historical perspective.

The Minneapolis Fed charts (see them here) compare employment and output to past postwar recessions. And the outlook, especially for employment, is grim.

The numbers for output( THIS IS A KEY FIGURE FOR MY VIEW ) don’t yet reflect the severity of the recession. Although the National Bureau of Economic Research dated the start of the recession to December 2007, the only reported quarter of GDP contraction so far has come in third quarter of 2008. However, economists expect perhaps the worst period of the recession came in the just ended fourth quarter, which will be reported at the end of this month. In a December survey by The Wall Street Journal, economists said output declined in the final period of 2008 and should fall through the next two quarters, at least.

However, the employment situation is already worse than some of the milder recessions and is moving lower than the median. Following the release of the December employment report, the number of jobs lost in the current recession as a percentage of the total work force rose to 1.9%. That’s lower than the trough seen in the recessions of the 1970s, 1990s and earlier this decade. But, it’s still below the 3.1% decline recorded in the 1981 recession.

And there are still likely more declines to come in the current recession. While the percent of jobs lost in the current recession trails 1981, it isn’t too far off the 2.3% drop recorded during the comparable month of that downturn. There were still six more months of drops during that period and thousands more jobs lost.

At this point, there’s little doubt that there is more pain to come in the labor market. –Phil Izzo"

And from Forbes:

Market Scan
U.S. Jobs Hemorrhage In '08
Maurna Desmond, 01.09.09, 10:35 AM ET

Major indexes slid Friday morning after the U.S. Labor Department reported that the national unemployment rate had jumped to a higher than expected 7.2% during the month of December and an additional 524,000 nonfarm jobs had been shed, leaving more than 10 million Americans out of work. Economists had expected a loss of 500,000 jobs, with an unemployment rate of 7.0%.

Further evidence of weakening in the labor market reinforces concerns that the American economy may be heading into a deeper and more prolonged recession than previously expected. It also increases pressure on the incoming administration quickly to forge a comprehensive stimulus program to stem the bleeding.

With Wall Street's fears confirmed, the Dow Jones industrial average fell 88 points, or 1.0%, to 8,654. The S&P 500 lost 14 points, or 1.6%, to 895, and the Nasdaq slipped 32 points, or 2.0%, to 1,584. Investors fled instead to safe-haven government debt, pulling down the yield on the benchmark 10-year Treasury note to 2.48%, from 2.45% just before the report and 2.44% late Thursday.

Joel Naroff of Naroff Economic Advisors said the government data indicated that the labor situation is rapidly deteriorating. "Firms are getting their cost structures in place, especially labors costs, in order to ride out the recession," he said. "They're not waiting( A PROACTIVITY RUN. PLEASE NOTE THIS COMMENT WELL. ). They're cutting workers away, and we're seeing an incredibly rapid( A PROACTIVITY RUN. ) adjustment to the economic situation."

In the four months since Wall Street's Black September, when markets were sent into a tailspin by the collapse of storied investment bank Lehman Brothers Holdings and the government take-under of insurance giant American International Group,, payroll employment fell by 1.9 million, or 1.4%. Since the start of the U.S. recession in December 2007, the number of unemployed persons has increased by 3.6 million, and the unemployment rate has surged by 2.3 percentage points.

"Basically, since December 2007 we've lost 2.6 million jobs [long-term unemployed] with no end of sight," said Peter Morici, a professor at the University of Maryland. "A stimulus package will stabilize the situation( THAT'S WHAT IT'S FOR. TO END THE PROACTIVITY RUN. ), but until we fix the banks the trade deficit, there won't be any recovery."

Compounding the sobering report was the upward revision of November nonfarm payroll losses to 584,000, from 533,000, and October's figure was also revised upward, to 423,000 jobs lost, from 320,000.

Firms of all sizes( EVIDENCE OF FEAR AND AVERSION TO RISK BECAUSE OF THE BREADTH. ) have been cutting jobs in the United States due to dwindling demand for their goods and services from within and without as the troubles that began in the American mortgage market have proved to be a worldwide contagion.( A CALLING RUN, FOLLOWED NOW BY A PROACTIVITY RUN. ) (See the Forbes Layoff Tracker.)

Earlier in the week, payroll processor Automatic Data Processing reported that the U.S. private sector shed a much higher than expected 693,000 nonfarm jobs in December. Earlier in the week, the Fed issued minutes from its Dec. 16 monetary policy meeting predicting negative GDP growth in 2009, with accelerating unemployment into 2010. (See "Fed Negative On 2009; Street Resilient.")

--Reuters contributed to this article."

Some slight offsetting news from Floyd Norris in the NY Times:

"As Bad As It Gets

The jobs report makes the final quarter of 2008 either the worst since World Was II or the seventh worse.

In terms of number of jobs lost, it ranks No. 1, with 1,531,000 jobs vanishing. The old high was the first quarter of 1958, when 1,087,000 jobs were lost. The first quarter of 1975 was the only other period in which a million jobs vanished.

The economy is much bigger than it was then, of course, so it may be fairer to look at percentage changes. In that, the quarter is No. 7.

Here are the top 10

1. First quarter, 1958, down 2.07%
2. First quarter, 1949, down 1.75%
3. Fourth quarter, 1953, down 1.32%
4. First quarter, 1975, down 1.30%
5. Foiurth quarter, 1974, down 1.22%
6. Fourth quarter, 1949, down 1.13%
7. Fourth quarter 2008, down 1.12%
8. First quarter, 1954, down 1.09%
9. Fourth quarter, 1957, down 1.03%
10. Second quarter, 1980, down 0.98%

During the quarter, governments actually added workers. Private sector employment was down 1,550,000, or 1.35%. That is a record for private sector jobs lost, but it ranks as only the 10th worst quarter in percentage terms.( AS I'VE SAID, WE ARE NOT IN AS BAD SHAPE AS THE SEVENTIES OR EIGHTIES, LET ALONE THE THIRTIES, YET. CONTEXT MATTERS. BUT PLEASE DON'T TAKE THIS FOR GRANTED. )"

Free Exchange says roughly the same thing:

"Interesting comparisons

Posted by:

The Economist l WASHINGTON

Categories:

Labour Markets

THE headlines are dire enough—last year witnessed the worst decline in employment since the second world war. True enough, looking at the absolute numbers. Non-farm employment was down 2.6m in the 12 months through December. But remember, the American population has grown a lot in the last 60 years. The labour force is now 39% larger than in 1982 and more than two and a half times as large as in 1948. Indeed, as a useful new database from the Minneapolis Fed shows, the decline in employment is so far tracking the median performance of the last ten recessions, which is a 1.9% drop from the start of the recession as defined by the National Bureau of Economic Research. It was down 2.3% at this point in the 1981-82 recession, and 4.3% in the 1948 recession (small wonder so many people feared the end of the second world war would tip America back into the Depression).

Will things get a lot worse? Of course they could( TRUE ). But the financial market's key leading indicators—stocks, corporate bond spreads, and the money supply—have all turned upward( TRUE ). With luck, that suggests we could be out of the depression by the second half of next year( I AGREE ). To be sure, that has been the consensus forecast, but it's a lot better than some of the multi-year slump scenarios now circulating( I AGREE )."

Now the enormously talented Felix Salmon:

"Yet Another Gruesome Employment Report

For most of the past decade, I've happily ignored the payroll report on the first Friday of every month. The market often got very excited about it, but the headline payrolls number was generally unreliable and full of more noise than signal.

The unemployment number, however, wasn't. And the 7.2% unemployment rate -- which rises to a whopping 13.5% if you use the broader figure which includes the underemployed as well -- is very, very scary. We knew we would almost certainly see these numbers at some point in 2009, but the fact that we got there by the end of 2008 really underlines just how bad this recession is becoming.( IT'S A PROACTIVE RESPONSE. )

The fact that unemployment is rising fast has no silver linings. Does it mean that companies are( OVER ) reacting fast and decisively to the recession, laying off workers in good time to avoid closing their doors entirely? There's not much evidence of that. Instead, it means higher unemployment payments, lower consumer sentiment and spending, and the continuation of a vicious spiral which is reaching Charybdis-like proportions.

If you're desperate for good news, you can cling to the 5-cents-an-hour increase in wages, but don't expect earnings to rise in 2009 by anything like the 3.7% they went up in 2008. Or maybe you can take solace in the fact that the headline payrolls figure (if you ignore the unemployment figure) was at least in line with expectations. But for me, that just means that economists and forecasters have finally woken up to grim reality.

Maybe the only real upside to this report is that it should light a fire under Congress to pass a stimulus package sooner rather than later ( YES )-- including the release of the second tranche of TARP funds. Let's start getting money out the door now: that's more important than haggling over what goes where( I'M NOT QUITE THAT DESPERATE. LET'S DO THIS RIGHT. SOON. )."

Jesse doesn't mince words:

"The December Non-Farm Payrolls Report: Portrait of a Ponzi Economy

The 'headline number' is the seasonally adjusted net change in jobs. The drop out of the range that was held in the prior years is obvious on this chart.



This is the (in)famous Birth Death Model from the Bureau of Labor Statistics in which they add jobs as a 'plug' to account for new jobs being generated by the economy from smaller business. The trend is very regular as can be seen on this chart. So regular in fact that it is exposed as imaginary, useless. They do not even bother to trend it with the overall economy and jobs market. The only good thing that can be said about it is that it is added to the non-adjusted jobs number first, so its effects are swallowed up by the seasonal adjustment in many months.



This chart shows the drop off in jobs growth was precipitous( A PROACTIVITY RUN ). We believe that it was much less precipitous ex government fudging. The recessionary decline was masked by the government. Well, its obvious now.( TRUE )



It always good to remind ourselves of the huge swings in jobs numbers before the seasonal adjustments. It is those adjustments, and the huge revisions made to the series both in the prior month and in whole sections of the numbers, that hide a multitude of statistical sins.



This chart shows the peak in the economy, and the beginning of the decline. As one can see it was not the sudden onset of the housing collapse that brought down the economy. Rather, it was the rot underneath the foundations of the economy that triggered the housing collapse, and all the other Ponzi schemes that are now collapsing. ( A CALLING RUN, FOLLOWED BY A PROACTIVITY RUN. )

Fixing the 'housing problem' will not fix the rot in the economy, which was papered over by the Fed's reflation starting in 2003. But there is a lot of money to be made by a lot of people in that fix, so we can expect a signficant amount of graft and waste( TOO TRUE ) before the real work begins.



Here is another view of the Jobs Trend that nicely demonstrates the rise off the bottom of the economy as a result ofthe Fed reflationary efforts, first under Greenspan and then Bernanke. It was a parabolic bubble which has now collapsed and is declining in a nicely defined parabola. That's a sixth order polynomial describing the trend.

Posted by Jesse at 10:19 AM "

Now Justin Fox:

"Some things you should know about those unemployment numbers

Posted by Justin Fox | Comments (1) | Permalink | Trackbacks (0) | Email This

The Bureau of Labor Statistics issued its monthly Employment Situation report this morning, and you've surely already seen the headlines about 524,000 in job losses and a 7.2% employment rate. But I thought it would be helpful to go through the basics, as in times like these lots of people who normally ignore the employment report are suddenly obsessed with it. (For those of you who know far more about this stuff than I do, please feel to either move on or add your voluminous expertise in the comments.)

1. It's two different reports. The job loss number above and the employment rate come from two entirely different sources. The job loss is the reduction in nonfarm payroll employment reported by businesses in the Bureau of Labor Statistics' monthly establishment survey of 400,000 employers. The unemployment rate comes from the Census Bureau's monthly Current Population Survey of about 60,000 households. Given that there are far more households in the country than employers, it's clear that there's a lot more extrapolation involved in the second survey.

2. The unemployment rate is a deeply flawed measure. It's calculated by adding up the number of people who tell the Census Bureau that they're working and those who say they aren't working but have looked for work in the last four weeks, then dividing the latter by the sum. Obviously, this misses lots of people who'd like to have a job but have decided it's pointless to look. But this isn't a new flaw, and there are lots of other numbers available that together can give a more complete picture of the unemployment situation. (David Leonardt has the goods on this.) So it's not some kind of dread conspiracy, just a reason not to take the unemployment rate as the final word. Or the first one.

3. The unemployment rate is a lagging indicator. Because it only counts those who are looking for work, it tends to peak after a recession is over, when the economy is improving and those who had given up on finding jobs decide it's worth giving it another try. That's why the people who a month ago were saying, Hey, what's everybody all worked up about, the unemployment rate is only 6.5%, were blowing smoke.( TRUE )

4. So it's the payroll employment number you should pay attention to. It gives a much more timely, reliable picture of the speed and severity of a downturn than the unemployment rate does. Once the economy begins to recover, there are some issues. If lots of jobs are being created by new businesses not yet included in the establishment survey, they won't show up in the payroll number. At the point in the business cycle, it's also worth taking a look at the employment number from the household survey to see if it's performing substantially better. We're not at that point yet.

5. How bad is it? The headline everywhere this morning is that this was the Worst year for jobs since 1945, because the December-to-December job loss of 2.6 million was the biggest calendar year loss since 1945, when the country was demobilizing from World War II. But that's a misleading comparison, given that the population of the U.S. in 1945 was less than half what it is now. If you look at percentage job loss, 2008 was the worst year since 1982. Looking at calendar year losses is kind of misleading too, given that recessions usually aren't thoughtful enough to begin and end on New Year's Day, but you get the same result—worst since 1982—if you look at percentage job loss on a rolling 12-month basis. What really matters is job losses from the beginning to the end of the recession, but we don't know when this recession will end yet. Right now the pace of job losses is slightly worse than that at the worst of the 1981-1982 recession but still below that at the worst of the 1974-1975 recession. So while there are all sorts of reasons to believe that this will be the worst recession of the post-World War II era, the proof isn't there in the employment report just yet.( TRUE )

6. Any bright spots in the employment report? Not really( SLIGHTLY HIGHER WAGES ). Every industry sector lost jobs except education, health care and government, and they barely added any. The closest thing to a positive was that there weren't any big downside surprises. The December job loss of 524,000 was about the what the economists who follow this stuff were expecting, and the November number was only revised modestly downward (from -533,000 to -584,000)."

From The Big Picture:

"Counter-Intuitive View: Today’s NFP is Meaningless( I THINK THAT IT SHOWS EVIDENCVE OF A PROACTIVITY RUN. )

By Barry Ritholtz - January 9th, 2009, 7:00AM

Get a grip, people.

I’ve been dying to tell that to the parade of sycophants, pundits and talking heads who have been aghast at the possibility of a really really bad NFP number today.

Here’s a newsflash, folks: The employment situation in the US is bad. Whether today’s 8:30 data release is a loss of 1 million, or a gain of 50,000, it really does not matter one teeny bit.

Why is that? Because it really isn’t news.

Look, we know the economy has been in the crapper for a year. We also know it has gotten appreciably worse over the past 4 months. The trend has been negative for 12 months, and its going to keep getting worse for a while. I do not expect to see any sort of jobs recovery until deep into 2010 at the earliest.

We know that the NFP data is not very precise( TRUE ); They are subject to very significant revisions. And, with a Labor Force of 154 million (including more than 10 million unemployed), the monthly data are actually minor numbers, a very small percentages off of a large set. A 500k job loss is still less than a third of a percent of the Labor force. Tiny errors in percentages that small lead to what appears to be outsized changes.

Blame it on the recency effect: The tendency to overemphasize the most recent data point in a monthly series. It is a foolish way to ignore the trend and give greater emphasis to today.

Why should this one report matter so much? The only thing that I can think of is it gives the next stimulus plan an impetus to get over a trillion dollars.

But what about that 250 point sell off on Wednesday following the ADP report?

ADP was the excuse, but the more likely reason was the overbought condition of the markets. Up 20% in less than two months, with more than 80% of the S&P500 index trading over the 50 day moving average combined to create as good a reason as any for the selloff.

Sure, at some extreme, the numbers become somewhat worrisome: 1 million plus is a scary data point. But in the scheme of things, as bad as this number will be today, it is also relatively meaningless.

Other than that, you can file this NFP away: Expect it to be really bad (perhaps even 700k+), and expect it to matter very little."

Had enough? I did give you about as good a roster as anyone could hope for.

"he statistical seasonal adjustment process doesn’t handle abnormalities in the data very well."

Some good advice from Rebecca Wilder on News N Economics:

"For now, stick with the non-seasonal numbers when it comes to the BLS employment report

Seasonal adjustments sometimes make an very weak labor market conditions less onerous; this was the case for this week's initial unemployment claims report, and will be for the employment reports in December and January. The statistical seasonal adjustment process doesn’t handle abnormalities in the data very well.

Next week, when the Bureau of Labor Statistics (BLS) releases the December employment report (and for January as well), I suggest following the non-seasonally adjusted data, rather than the seasonally adjusted data. The normal seasonal patterns are not present, and the seasonally adjusted data will paint a slightly more benign picture of the job loss that will be reported in the nonfarm payroll.

An example: seasonal adjustments cannot predict statistical anomalies in unemployment claims report

The Department of Labor released a shockingly strong weekly initial unemployment claims report last Thursday:

In the week ending Dec. 27, the advance figure for seasonally adjusted initial claims was 492,000, a decrease of 94,000 from the previous week's unrevised figure of 586,000. The 4-week moving average was 552,250, a decrease of 5,750 from the previous week's unrevised average of 558,000.

The advance seasonally adjusted insured unemployment rate was 3.4 percent for the week ending Dec. 20, an increase of 0.1 percentage point from the prior week's unrevised rate of 3.3 percent. The labor market is improving – at least on a weekly basis, right? Wrong. The insured unemployment rate rose to 3.4% over the week, a signal that the national unemployment – currently at 6.7% - rate will rise.

The weekly claims fell simply because of the statistical process the BLS uses to rid the data of normal seasonal activity. Here is Bloomberg’s take on the report: The number of Americans filing first-time claims for unemployment benefits tumbled last week, skewed by the shortened Christmas workweek, while total jobless rolls reached a 26-year high, signaling a worsening labor market as the economy heads into the second year of a recession. That is incorrect reasoning because Christmas occurred on a workday (Mon. through Fri.) four out of the last five Christmas weeks, which should be (at least partially) accounted for in the seasonal adjustment process( TRUE ). Normally, the statistical process used to compensate for seasonal patterns works quite well. However, this process cannot compensate for anomalies in the data, or strange events that normally do not occur in December.

The chart illustrates the seasonally adjusted and non-seasonally adjusted data since Christmas of 2003, where I highlighted the comparable report for each of the preceding five years. Every year the number of claims filed in the last week of December rises, and on average, the NSA data rises by 75,233.

The seasonal adjustments extract this cyclical pattern (always rises in December) from the data, leaving only the trend that exceeds (or falls short of) the seasonalities. New claims filed beyond what normally happens in December (the seasonal adjustment) signals a weaker-than-normal labor market, while claims filed below what normally happens in December signals a stronger-than-normal labor market.

On December 27, 2008, the NSA number of claims filed rose by just 1,892, which is 73,331 below the average. The seasonal adjustment process sees this as a good thing, and reports a stronger-than-normal labor market, -94,000 new claims filed. But what happened on December 27, 2008 was clearly not normal, as every other indicator signals an contracting labor market.

It is more plausible that a negligible amount of seasonal hiring actually occurred in November and December. Therefore, the last week of December saw very few firings, and a negligible number of initial unemployment claims were filed. Seasonal adjustments would miss such a statistical anomaly.

Beware of the seasonal adjustments in this cycle; this applies to the Bureau of Labor Statistics employment report as well.

The chart illustrates nonfarm payroll since 2004. Like clockwork the seasonal pattern is this: firms hire in October and November for the holiday season; they start firing in December; and then they slash jobs in January.

This year, firms didn't hire in October nor in November - nonfarm payroll fell by 320,000 and 533,000, respectively. Therefore, the seasonal firing pattern through December and January will not exist and the seasonal adjustements will not apply.

In December and January, the seasonal adjusted series will show a stronger labor market than actually exists. Holiday workers will not be fired in December and January because they were never hired in October and November, and the seasonal job loss will be less than the non-seasonal job loss. The non-seasonally adjusted numbers will paint a more accurate picture of the labor market.

Rebecca Wilder"

This is very good advice, but I'm looking at productivity and what I call buying power as well. The Productivity will help determine if I am right about a proactive laying off of workers being a main cause of the loss of jobs, not driven by demand( Fundamentals ), but out of the Fear and Aversion to Risk. The buying power will determine if people who are still employed are, in fact, getting wealthier. This will help the diminution of the Fear and Aversion to Risk going forward.

"but if history is a guide, it's only going to get worse from here."

Although we've seen that there's no way to tell where the employment figures will trend from here, Zubin Jelveh isn't optimistic:

"It's probably the last thing anyone wants to hear so soon after news of the gawk-inducing 533,000 lost jobs suffered last month -- but if history is a guide, it's only going to get worse from here."

My opinion is that history can't tell us.

"That's because the majority of job losses in the 11 previous downturns came in the second half of the recession. We're 11 full months into the current one and most forecasters (what else do we have to go by?) think the recession will last through the end of next year."

Yes, these are projections.

"Let's assume that's somewhere near the truth. Out of all the jobs that were lost during the average recession since 1945, 26 percent of them came in the first half and 74 percent in the second half. There've been 1.9 million jobs lost thus far in the current downturn, so the historical average would mean we could lose another 5.7 million jobs, for a total of 7.6 million by the end. That would be the most jobs lost during a post-Great Depression recession. (If you factor in population, the short 1945 recession, which saw the evaporation of 3.3 million jobs, was worse.)"

When we looked at the averages earlier, there was just no way to tell where we're going.

"But there's at least one reason to have some optimism. Job losses in the three most recent recessions, including the 16-month 1981-82 downturn, were more evenly spread out with an average of 42 percent of all lost jobs gone in the first half and 58 percent in the second half.

What happened to cause the more balanced jobs picture?

One likely explanation is the Great Moderation, and now we just have to hope that the GM is not over with the collapse of the securitization market."

And so we're back where we started, unable to predict the future. What's new?

"Below we list the 41 worst employment reports since 1939."

It's hard to find the employment numbers anything but awful, but I do want to keep this crisis in perspective and not fall prey to my usual melancholy nature. From Bespoke:

"41st Worst Monthly Jobs Report On Record...Yes 41st

This morning's employment report showed that during the month of November the US economy lost 533K jobs which was the sixth largest monthly decline on record. However, just as a move of 100 points in the Dow was a much bigger move when the Dow was at 1,000 than it is now that we are at 8,000, adecline of 500K jobs when the workforce consists of 140 million workers is not nearly as significant as a decline of 500K jobs when the workforce consists of 40 million workers as it did in 1945. Today's jobs report was certainly nothing to get excited about, but it also wasn't the Armageddon scenario that some are making it out to be. Below we list the 41 worst employment reports since 1939.

"History tells that once the labor market weakens as much as it has in the past several months, job-shedding takes on a life of its own "

Real Time Economics on the WSJ, which I constantly read, sums up the employment news:

"Economists React: Employment Report ‘Almost Indescribably Terrible’

Economists and others weigh in on the substantially worse-than-expected decline in nonfarm payrolls, and the increase in the unemployment rate.

This is almost indescribably terrible. In the past six months the U.S. has lost 1.55 million jobs, almost as many as were lost in the whole 2001 recession, which included 9/11 and the two months after. The pace of job losses is accelerating alarmingly, as this report attests, with steep drops in most sectors but the biggest deterioration in services — down 370,000 in November after 153,000 in October. Note education/health and governmentt added 59,000, so core private payrolls even worse than headline. Desperate. –Ian Shepherdson, High Frequency Economics

Desperate.

"Quite simply, there was nothing good in this report. Even though some might take comfort in the relatively modest uptick in the jobless rate (from 6.5% to 6.7%), this is actually quite misleading. In fact, the household survey’s measure of employment came in at -673,000, an even sharper plunge than seen in the payroll figures. The jobless rate was actually restrained by a large decline in the labor force — as we had suspected… It is worth noting that the November payroll figures would have been even worse were it not for a special factor. We estimate that the direct and indirect effects of the resolution of the Boeing strike probably added about 35,000 employees to manufacturing payrolls in November. –David Greenlaw, Morgan Stanley"

Nothing Good.

"The September-though-November period saw an average 419,000 average monthly job losses, as the recession deepened. More timely unemployment insurance claims data suggest no let up in the current pace of job losses. While the unemployment rate rose only 0.2 percentage point to 6.7% in today’s report, the labor force shrank by 422,000 in November and 237,000 over the September-November period. While this suggests a discouraged worker effect, the severe worsening in labor markets has been relatively recent, with employment declines in January-August deviating little from the -82,000 per month average. There is little doubt that labor slack is rising rapidly, and the unemployment rate will jump in the months ahead. –Steven Wieting, Citigroup"

The Rate Will Jump.

"The November decline stands as the largest single month drop since December 1974, when employment plummeted by 602,000. With the latest revisions averaging nearly 100,000 per month, the November job loss could easily end up being the new post-World War II benchmark for severe job declines. The current job losses however are a much smaller share of total employment. For instance, the 535,000 decline represents a 0.39% drop in employment from October while the December 1974 drop was 0.77%. Nonetheless, the scale and speed of job losses over the last three months remains the worst since the 1973-75 recession. –David Resler, Nomura Securities"

Worst Since 1973-75 Recession.

"The bottom drops out of the labor market… History tells that once the labor market weakens as much as it has in the past several months, job-shedding takes on a life of its own and tends to persist for a long while. We expect labor market conditions to be dreadful for many months to come and consequently for consumer spending to continue to decline. The U.S. consumer, which for so many years was the global engine of growth, will remain a significant drag on economic activity in coming quarters. –Joshua Shapiro, MFR Inc."

Now, this is hugely important from my point of view:

"History tells that once the labor market weakens as much as it has in the past several months, job-shedding takes on a life of its own and tends to persist for a long while."

I believe that this shedding of jobs is also an overreaction due to the overshoot on aversion and fear of risk.

"These are god-awful numbers. The economy is headed downhill and the brakes are not working. There are so many layoff announcements that it is hard to keep track of. Some businesses are cutting jobs in anticipation of tougher times. This is especially true for retail, manufacturing and finance, which accounts for the bulk of jobs in the country. They want to trim fats and stay lean and mean for the tough times ahead. Also, business spending will be a drag on the economy in the foreseeable future. –Sung Won Sohn, Smith School of Business and Economics"

In anticipation. The same point as above.

"A shockingly weak report that suggests the fourth quarter could see a drop in real GDP of 5% or more at an annual rate. The large downward revisions to employment in September and October suggest that the economy was even weaker than we thought when the credit crunch intensified (indeed the employment report for September, which now shows a larger than 400,000 decline in jobs, was surveyed in the week before Lehman Brothers failed).,, These data will spur the calls for a massive stimulus plan, increase the chances of a rescue package for the domestic auto industry. –RDQ Economics"

I'm sure that's correct. The jobs lost in the Auto Industry and its tributaries would make this number veer upward even more drastically.

"Jobs plummeted again in November with deep and widespread job losses. Much of this collapse in jobs was due to the collateral effects of the credit crunch which is only slowly being repaired. So far this year, 1.91k jobs have been lost with half of those jobs being lost in the past 3 months as the downward spiral has accelerated. The recession is intensifying and the economy is rapidly shrinking. –Stephen A. Wood, Insight Economics"

Intensifying And Rapidly Shrinking.

"This was much worse than was expected and represents wholesale capitulation. The threat of a widespread depression is now real and present. –Peter Morici, University of Maryland "

What we need to battle is this capitulation. It's a matter of attacking and overcoming the presuppositions and conclusions causing this capitulation by human beings in the face of this crisis.