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. )
And here:"
Employment Recap
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 ETMajor 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.
Now Justin Fox:"
Some things you should know about those unemployment numbers 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. )
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.
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