EMPLOYMENT REPORT
Except for the drop in the workweek and aggregrate hours worked the February employment report was almost a duplicate of the January employment report. In both January and February the payroll survey reported a slight drop in employment and the household survey showed a modest increase in employment. Essentially both reports are showing changes so close to zero that they are well within one standard error of zero.
Generally, the payroll report is considered the better report. But at cyclical turning points the household survey tends to lead the payroll survey. I think that is because the household survey does a superior job of capturing trends changes among small firms and small business tends to respond more quickly to cyclical changes than large firms.
Both reports increase my confidence in last months analysis that the economy is in a transition mode. The period of wide scale lay-offs has ended but firms have yet to begin wide scale employment.
The pre-report apprehensions about the impact of the February snow storms were ill-founded.
The payroll survey reports how many people firms have on their payrolls. So even if people were not able to make it to work, they were still on firms payrolls. Consequently, the storms had no impact on firms payrolls. In the household survey the people who did not make it to work because of the storm would still think they had a job so they would report that they were employed.
Where the storms would have an impact is on the average work week and aggregate hours worked. Consequently the drop in aggregate hours worked and the weakness in weekly average hourly earnings probably was due to the storms. But we will have to wait until next month to really know.
However, the continued weakness in average hourly wages and weekly wages is a feature of this cycle and probably was not impacted by the storms.
Many look at weekly earnings as a leading indicator of consumer spending, and I know I am sometimes guilty of this. But the historic record is that real earnings is actually a lagging indicator of consumer spending at cyclical bottoms. Over the course of an expansion, and at cyclical peaks real income is very much a concurrent indicator of consumer spending. but at bottoms consumer spending is driven more by lower rates, better consumer confidence and lower inflation. Retail sales are highly skewed with the upper 40% of the income spectrum accounting for over 60% of retail sales. So the important factor is people who have stayed employed and those whose income stems from non-wage sources deciding to spend. Often this
is driven by greater wealth; especially from the stock market and rebounding home prices.
We are getting the higher stock market this cycle, but not the rise in home prices.
Historically, once the unemployment rate peaks, as it apparently has this cycle, it continues to fall for one to two years. Even in the last two cycles when the peak unemployment rate lagged the economic trough by months the unemployment rate continue to fall once it had peaked.
So the standard forecast, even by the administration and the CBO, that the unemployment rate will remain around 10% is a forecast of something that has never happened. I’m not saying that weak growth and high productivity can not keep the unemployment rate near the peak of 10%, but it is something that has never happened.
Assuming the hiring diffusion index figures are right, there is some quite good news in the report. The factory diffusion index climbed sharply, showing more factory sectors hiring than laying off. The overall private diffusion index didn’t cross 50, but did climb. A narrower base of layoffs is good news.
Extrapolating wildly from the data, we may want to guess that the discrepency between household and payroll jobs figures in the past couple of months (way too few to mean much, especially about the household figures) suggests small and medium firms may be hiring. Since they were the worst performers on the way into the recession, and for a number of reasons might be expected to remain the worst performers, seeing a pick-up in hiring in smaller firms would be very good news.
Don’t care for the wage trend, though.
I don’t see why the payroll survey would every be the better report and prefer the household survey since it’s not tied to any pior lists of known establishments. I agree that in relative terms the household survey is better during periods of change and used to argue with slubs on this point during the recovery following the 2001 recession.
Generally, the payroll report is considered the better report. But at cyclical turning points the household survey tends to lead the payroll survey. I think that is because the household survey does a superior job of capturing trends changes among small firms and small business tends to respond more quickly to cyclical changes than large firms.
I agree with this point 100 percent and used to argue it with slugs during the economic recovery following the 2001 recession. I think for people working for themselves when times go bad they make less money but they don’t lay themselves off. Actually in good stable times I don’t see why to
Something is driving into a ditch there. These sordid figures mean: a) GDP is overstated by about 25% as states are not productive. No wonder forecasts are flawed if they report 3% growth where they’d need to report 22% contraction etc. b) If you left that money in the economy (at EXACTLY where it was looted from) it would drive staggering growth rates, after all, the money is extracted most from where growth (or profitability) is largest. It’s like clipping the longest shhots always and wondering why the tree isn’t growing any taller. And naturally this doesn’t contain the UNFUNDED future entitlements, so the deficit is (discounted to today) five to fifty times larger depending on what future revenue streams are projected. Sanity anyone? However, this will be nothing against the next wave of mortgage defaults looming, since the resetting variable rate mortgages are even worse than the subprime that started the crisis. If employment figures look so bad ALREADY, how much worse are they going to look in 2011???
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I think that is because the household survey does a superior job of capturing trends changes among small firms and small business tends to respond more quickly to cyclical changes than large firms.
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could you point out how exactly by calling around 60,000 households you can find out
about ‘trends changes among small firms and small busines’ in country w/ 305 mln people?
thank you
alex
For some real data:
http://guerby.org/blog/index.php/2010/01/31/211-larry-summers-lit-mon-blog
Employment figures are the epiphenoma of the underlying money-debt-asset supply-asset valuation system; i.e. the state of the macroeconmic system with the caveat that the Federal Reserve and world Central Bankers are creating paper to sustain ‘nonessential ‘ ‘non Adam Smith economic’ service and entitlement wages.
The One Hundred and Fifty-Two Year US Equity Great Second Fractal Cataclysmic Collapse: 5 March 2010: A Fractal Replica of 11 October 2007?
Though the Federal Reserve has grossly distorted the normal activity of supply and demand in the debt markets, buying over ten months 300 billion dollars of US treasuries ex nihilo, the equivalent entire annual quantity normally available for equity speculation and money based structural support, a review of two years of readily available weekly and monthly trading valuation patterns for the US CRB and composite indices of US , European, and Japanese equities, nevertheless, easily demonstrates currently occurring saturation areas along the tops of the money supply based asset valuation trading curves.
Will money entering and exiting at these markets’ saturation areas occur nonlinearly and predictably according the quantum principles of saturation macroeconomics?
For the saturation macroeconomist/scientist who follows the simple mathematical quantum fractal patterns, the next three weeks in March 2010 will be among the most interesting days and weeks of asset valuation/fractal time unit observation. A spectacular 152 year nonlinear event is expected to occur in the third week of the next three week trading period. March 2010 is the 93 month of a 46/92 :: x/2x monthly pattern starting in October 1998 which began a major extension of the 70/140 year first and second fractal series for United States equity equivalents with extensional successive debt-money bubbles in sequentially the PC-internet industry, the real estate-financial industry, and now the central bankng industry.
Expected is the cataclysmic (beyond October 1987) nonlinear asset (equity and commodity ) devolution trading event that will define and validate the science of Saturation Macroeconomics.
The 93 month second fractal is made of a 14/35/28/19 of 21 month ideal x/2.5x/2x/1.5x fractal series. March, April, and May represent the terminal three months of the 19,20, and 21st month ideal fourth fractal.
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The 28/19 third and fourth fractals of the 14/35/28/19 of 21month series is configured in a 34/84/68 week fractal with the Wilshire apogee at 11873 on 11 February 2010 of the third fractal’s 2x or 68th week progression.
March 2010’s Wilshire has two base fractals of 22-23 weeks and 19 weeks starting in October 2008 and March 2009 respectively. The ideal weekly counts of the second fractals to these two base fractals are 22-23/54 of 57 weeks and 19/35 of 38 weeks respectively.
For aurophiles, an interpolated 11/28/22/14 of 17 week fractal (x/2.5x/2x/1.5x) matches the Wilshire’s weekly end point and the CRB’s similar weekly end point.
A reflexic ideal 20/50/40 day :: x/2.5x/2x fractal allowed the science of saturation macroeconomics to exactly and prospectively predict October 2007 as the Wilshire’s nominal high occurring on day 40 of the third fractal.
5 March 2010 showed minutely gaps much like 11 October 2007. 5 March 2010 represented the 20th day of the third fractal of a 10/25/20 :: 2x/2.5x/2x reflexic fractal series (a 0.5 time length exact fractal proportionality of the 11 October 2007 series). Unlike 11 October 2007 which ended(as predicted) near the low of the day, 5 March ended near the high which suggests that a […]
Alex West– I suggest you take a look at a stat text book on smapling theory.
Essentially all polls use samples to take measurements like consumer confidence, election polls, etc., etc.,
Adding in a synchronized global recession harming exports gives a double-barreled shot.
The 2008 recession began 7 years after the 2001 capital goods recession,
so there were plenty of excesses just in those 7 years to work off.
So much of life is cyclical. If we pull together and follow Barry’s advice above to preserve
the system but remember that what are being called “banks” in this debate are very large
holding companies that own as part of their holdings depository institutions (real banks),
then we won’t cry if the holding companies vanish.
As a graphic design firm, we have to deal with over-seas designers,
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Thanks Spencer for your input