something smells fishy / Pimco on the employment data

nothing new to readers of the blogging world. it is very telling when one of the most important statistics is almost useless....remember this when you hear the "experts" yelling on cnbc etc after the number from friday......one can expect a mega revision downward in august......if you want more on this topc surf the labels with lots of frustrating details on how flawed the data is......

dürfte für leser der blogs nichts neues sein. es ist aber bezeichnend wenn eine der wichtigsten erhebungen komplett nutzlos ist....immer wieder lustig wenn man mit diesem wissen die "experten" auf allen kanälen zu sehen bekommt....erneut an diesem freitag zu bewundern..... es ist jetzt schon klar das die nächste revision eine echte hausnummer gen süden sein wird ..wenn ihr mehr details zur erhebung wissen möchtet bitte unter den labels stöbern..

Here at PIMCO, we continue to expect the unemployment rate to go up. Thus, we are still (painfully, since December) long of duration, concentrated in the front end of the yield curve. And why are we still bearish on employment growth?

First and foremost, unemployment is a lagging variable, notably of momentum in discretionary aggregate demand. And discretionary aggregate demand has been unambiguously decelerating in recent quarters, and not just in residential construction, as displayed in the chart below.

The Great Puzzle

So why hasn’t the unemployment rate already risen? It’s the great puzzle, in the words of San Francisco Fed President Janet Yellen. The short answer to the puzzle is that the labor force participation rate has fallen, accounting fully for the drop from 4.7% to 4.5% for the unemployment rate over the last year. But this doesn’t make sense when you look at nonfarm payroll growth, which, again in the words of Ms. Yellen, has been gangbusters.

The labor force participation rate is decidedly pro-cyclical, meaning that it goes up as tight labor markets induce new entrants into the labor market; and it goes down when soggy labor markets lead the discouraged unemployed to drop out of the labor force. So, the short answer to the puzzle is the right answer only if nonfarm payroll growth really ain’t gangbusters.

And new research by both Ray Stone4 of Stone and McCarthy and Sheryl King5 of Merrill Lynch suggest this is indeed the case. Please refer directly to their research for the exhaustive details, but the bottom line is simple. Detailed data in the Bureau of Labor Statistics (BLS) Business Employment Dynamics (BED) release, which comes out with a two-quarter lag, show employment growth of only 19 thousand in 2006Q3, while the nonfarm payroll tally for that quarter was over 450 thousand. More recently, the BLS’s more timely Job Opening and Labor Turnover Survey (JOLTS) for April – last month! – showed job openings rose only 24 thousand, with this series essentially flat since last August. The JOLTS report also showed that new hires in March (this data subset is released with a one month lag) fell 29 thousand.

Something smells more than fishy here. Not that I’m accusing the BLS of any skullduggery. None! Rather, it is a historical fact that nonfarm payrolls – before annual benchmark revisions, which continue for six years! – understate employment early in recoveries (leading to the inevitable contemporaneous label of "jobless recovery"), while they overstate employment late in expansions.

And a key reason is that the BLS, while very good at counting heads at existing firms, must make an assumption, in real time, about the birth-death rate for firms, so as to estimate the net gain/loss in jobs as firms open and close, a never-ending feature of a capitalist economy. In the early years of expansions, the birth assumption systematically is too low and the death assumption is systematically too high, which results in "jobless recoveries," which turn out to be not-so-jobless recoveries upon revision. The exact opposite holds in the late years of expansions and particularly in recessions. Such is the case, it would appear, at present.

Thus, in contrast to last August, when the job tally for the year ending March 2006 was revised up some 800 thousand, a stunningly large revision, the opposite is likely to unfold in this August’s benchmark revision for the year ending March 2007. Not to suggest, I hasten to add, that a downward revision equal to last year’s upward revision is in the cards. The honest answer is that we don’t know how big it will be. But available data, notably the BED and JOLTS data, point squarely to a downward revision.

So what, you say. Economists always bellyache about the quality of the data when they go against their forecasts. This is true. It is also true, however, that poor data can make for poor policy making, if and when the data is taken to be religiously true. This is particularly the case if the data is known to be lagging data of the business cycle, as is the case with the unemployment rate. Acting on the data, or refusing to act because of it, is the stuff of policy mistakes, sometimes known as recessions

as i´ve said before they should hire the "statz crew"..... :-)

Working Under the Radar / illegal immigrants as a percentage of total jobs

this is a another reason why the official employment data is not showing the real impact of the slowdown in the economy.....

hier ein weiteres beispiel dafür das die offiziellen daten aus den usa nicht annähernd den wirtschaftlichen verlangsamung anzeigen......

Jeffrey S. Passel, a former Census Bureau demographer who works at the Pew Hispanic Center, estimates that more than 7 million of the 12 million illegal immigrants are employed.

They account for nearly 5 percent of the nation’s civilian labor force, with higher shares in some occupations: 29 percent of roofers, 24 percent of agricultural workers and 25 percent of construction laborers.

Employment Numbers "Can´t Truss It" / Minyanville

click on the labels to read more about the bogus numbers.......and click on the headline to read the 4 other things you need to know.

mehr zu den unfassbaren ermittlungsmethoden des us arbeitministeriums unter den labeln...klickt bitte auf die überschrift um mehr von minyanville zu lesen.

Can't Truss It
So here's a song to the strong 'bout a shake of a snake, and the smile went along wit dat, can't truss it, according to Public Enemy and (finally!) the Wall Street Journal this morning.

• All the way back in 1991 Chuck D warned us that we can't truss it.


• Now, 16 years later, the Wall Street Journal is wondering if Chuck D was right.
  How is it, the Journal asks, that job growth remains robust even as the economy has slowed, especially relative to the housing industry?


• Housing starts in April fell 33% from their recent peak in January 2006, the Journal notes, yet the number of residential-construction jobs has dropped by only about 3% over the same period.


• After surveying a handful of economists, the Journal concludes that this must be because 1) layoffs have lagged the housing slump and the worst is yet to come, 2) the Labor Department's Bureau of Labor Statistics is overestimating employment, or 3) the BLS isn't registering job losses by illegal immigrants.


• Well bass in our face! Can't truss it.


• Like Chuck D we got a story that's harder than hardcore and one that, as incredible as it is to believe, wasn't even mentioned in the Journal story.


• The BLS's use of the Birth/Death model. Can't truss it.
  How a story about the economy slowing in the face of "robust job growth" can not mention even once the Birth/Death model is beyond us, but what are you gonna do? Ya can't truss it.


• U.S. job growth in April slowed to 88,000, but you can't truss it, because the Birth/Death model contributed 317,000 adds to those 88,000 jobs.


• Since the beginning of the year, the birth/death model has accounted for a net 388,000 jobs. Can't truss it.


• Last year it added 964,000 jobs. Can't truss it.


• We want to believe, of course.


• But because the Bureau of Labor Statistics refuses to allow academics and commercial economists access to the models they use for the birth/death additions, we'll stick to our song to the strong 'bout a shake of a snake, and the smile went along wit dat, can't truss it.

maybe the bls should hire this crew....

Current recovery great for profits, poor by most other measures

some nice arguments for not making the tax cuts permanent.

gute gründe die zur diskussion stehenden steuererleichterungen nicht zu verlängern.


Recent data regarding fourth quarter (2006) growth in U.S. gross domestic product (GDP) allows us to examine how the current recovery, now entering its fifth year, stacks up against the other recoveries since World War II that lasted as long. This assessment can shed light on the effectiveness of macroeconomic policies enacted in the name of improving economic growth.

This much is clear: the current recovery substantially lags the historical average in GDP growth, employment growth, investment in equipment and software, and, with the deflating housing market, even in residential investment..

> i have to question the residential investment data. the 3.5% doesn´t make any sense to me. here is a better chart from pimco that is closer to 6%. maybe epi just mixes up the two.

> bei den wohnungsbauinvestitionen ist epi sicher ein dreher unterlaufen. die zahlen von pimco reichen an die 6% heran und sind sicher richtig.

In short, the current recovery looks weak on all measures except profit growth. As a policy lesson, the large tax cuts of 2001 and 2003, which have had ample time to affect the economy by now, have failed to deliver economic performance that even matches up to the past average.

an autopsy on the march jobs report / northern trust - kasriel (pdf)

here is a summary of comments on the surprising strong job numbers. i highly recommend to click on the headline to see what paul kasriel from northern trust has to say.

hier folgt ne zusammenfassung des letzten überraschend starken arbeitsmarktberichtes. ich empfehle unbedingt auf die überschrift zu klicken um zu sehen was paul kasriel von northern trust zu sagen hat.

he is digging into the numbers and after reading his report there are some more doubts that the numbers are as good as they looked at first glance.

er geht ins detail der daten und nachdem man sich seine sicht der dinge angesehen hat bestehen einige zweifel ob die lage wirklich entspannt ist

just one highlight from kasriel: / nur ein beispiel von kasriel

With so many people being employed in retailing at relatively low hourly earnings, I guess it is not surprising that there has been a sharp increase in folks working multiple part-time jobs now that their adjustable rate mortgages are resetting. Chart 7 shows that in March 2007 vs. year-ago, there was an 11.15% increase in people working multiple part-time jobs. more from

mish http://tinyurl.com/326rom

calculated risk http://tinyurl.com/2m5f8w

barry ritholtz http://tinyurl.com/2ubbux

tim " the mess that greenspan made" iacono http://tinyurl.com/yw3sd7

morgan stanley http://tinyurl.com/2gllxo

economic policy institute (epi) http://tinyurl.com/ytbtug

thanks to epi and mish for the chart

größer/bigger http://tinyurl.com/23hwak

employment report feb. 2007

this cartoon is becoming more reality every month......

dieser cartoon wird immer mehr zur realität.....


lets do the math. 118.000 jobs via the black box "birth death model" (vs 116.000 in 2005 when the economy wasn´t in a downturn) and of the 97.000 created were 39.000 40% government jobs. ouch! the quality of the numbers is deteriorating. and i view this report as weak http://www.bls.gov/news.release/empsit.nr0.htm

ihr könnt ja sleber mal nachrechnen. 118.000 nur geschätzt (keiner weis nach welcher formel) das ist umso erstaunlicher als in 2006 116.000 geschätzt wurden. und in 07 befindet sich die wirtschaft unbestreitbar in ner schwächephase. von den übriggebliebenen 97.000 sind dann noch satte 40% jobs die vom staat geschaffen worden sind. schwache qualität der zahlen.

the formula for the birth death model? :-)

U.S. Feb. services payrolls up 168,000
U.S. Dec., Jan. payrolls revised up 55,000
U.S. Feb. factory payrolls fall 14,000
U.S. Feb. construction payrolls fall 62,000
U.S. Feb. average workweek falls to 33.7 hours.
U.S. Feb. average hourly earnings up 0.4% vs. 0.3%
U.S. Feb. unemployment rate falls to 4.5% vs. 4.6%
U.S. Feb. nonfarm payrolls up 97,000 vs. 100,000 expected

Builders cut 62,000 jobs, the biggest decline since January 1991, after adding 28,000 the prior month.

i wanted to highlight that despite the numerous layoffs from the lendingindustry it looks like the whole finance sector has added jobs. maybe there is a time lag until they become effective and/or other financial are on a hiring binge. another reason could be that lots of brokers etc were self employed. but i remain sceptical....http://www.bls.gov/news.release/empsit.t14.htm

2007 Net Birth/Death Adjustment (in thousands)

Supersector	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Natural Resources & Mining	-2	1
Construction	-52	11
Manufacturing	-23	3
Trade, Transportation, & Utilities	-29	10
Information	-9	5
Financial Activities	-17	11
Professional & Business Services	-48	28
Education & Health Services	10	12
Leisure & Hospitality	1	34
Other Services	-6	3
Total	-175	118

from bloomberg http://tinyurl.com/27lufd

but maybe the weather was the reason for the poor number: (but it feels like this argument comes always when the numbers are weaker.....)

Poor weather kept 505,000 people from working in February, more than twice as many as a year earlier, the Labor Department said.

Hiring in other industries (government !) helped make up for the biggest drop in construction jobs in 15 years, a sign that the slowdown in housing isn't filtering through to the rest of the economy

more/different views on the jobs number

from calculated risk http://tinyurl.com/27956r

a nice rant from rodger rafer ! http://tinyurl.com/25gdos

from tim "Fewer Drywall Nailers, More Baristas " http://tinyurl.com/2kvx9q

from mike larson http://tinyurl.com/ynwl56

from mish http://tinyurl.com/254ll3

northern trust http://tinyurl.com/ypp5am (pdf)

and another must see from mish! http://tinyurl.com/2g23an

remember that the data is revised 5-7 times during the next 12 month... (sarcasm of)

eigentlich lohnt die ganze aufregung eh nicht da die daten mehrere male binnen der nächsten monate revidiert werden......

us employement data nov.2006

one of the better reports if you look at the headline (especially the small impact of the birth/death model). but as we know from prior releases we have to wait aftre the revisions in 2007 or maybe 2008 to get the right figures. ... the weak point in this release is that all the gains are coming from the servicesector and the gouvermentsector. hard to believe that especially the gain in the retailsector has much room to grow. i think it is a safe bet that there is lots of downside...... http://immobilienblasen.blogspot.com/2006/11/us-arbeitsmarktbericht-us-employement.html#links

U.S. Nov. average workweek steady to 33.9 hours
U.S. Nov. average hourly earnings up 0.2%
U.S. Nov. factory jobs down 15,000; services up 172,000.
U.S. Nov. construction jobs down 29,000
U.S. Nov. retail jobs up 20,000 strongest pace in a year
U.S. Oct., Sept nonfarm payrolls revised up by net 42,000
U.S. Nov. unemployment rate 4.5% vs 4.4% in Oct.
U.S. Nov. nonfarm payrolls up 132,000 vs 112,000 expected

one thing that is a little bid optimistic is that the bls assumes that they have only a 2k difference in the construction assumption from 2005. maybe this can be explained to some part with the desperate builders try to built as fast as they can so they can sell before the full bust is coming. if this is the rational behind this number should fall of a cliff in the next quarters!

http://www.bls.gov/web/cesbd.htm

2006 Net Birth/Death Adjustment (in thousands)

Supersector	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov
Natural Resources & Mining	-4	0	0	1	1	1	1	1	1	1	0
Construction	-55	10	27	36	39	29	-8	14	10	8	-8
Manufacturing	-25	3	5	-1	7	9	-21	2	5	-4	3
Trade, Transportation, & Utilities	-36	10	21	23	26	20	-28	23	19	24	20
Information	-8	4	-1	7	4	-2	-6	6	-6	4	7
Financial Activities	-11	10	8	19	5	6	-11	7	3	19	4
Professional & Business Services	-59	29	30	62	33	28	-8	22	10	30	1
Education & Health Services	14	12	2	31	13	-4	-4	16	11	33	10
Leisure & Hospitality	-5	33	37	85	76	81	38	25	-28	-41	-9
Other Services	-4	5	6	8	7	7	-10	5	3	-1	1
Total	-193	116	135	271	211	175	-57	121	28	73	29

http://www.bls.gov/news.release/empsit.nr0.htm

Nonfarm employment....... 132
Goods-producing -40
Construction.........-29
Manufacturing........ -15
Service-providing 172
Retail trade 20
Professional and usiness services.. 43
Education and health services........... 41
Leisure and hospitality 31
Government........... 18

Construction employment declined by 29,000 in November, following a loss ofsimilar size in October. The November decline was spread across all componentindustries. Since peaking in February of this year, employment in residentialspecialty trades was down by 109,000. Employment in nonresidential specialtytrades edged down in November, after trending up during the first 10 months ofthe year.

Manufacturing employment continued to trend down (-15,000) in November.Motor vehicles and parts lost 7,000 jobs. Employment continued to fall in two construction-related industries: wood products (-6,000) and furniture and related products (-5,000). Computer and electronic products manufacturing added 5,000 jobs over the month.

update from mish! http://globaleconomicanalysis.blogspot.com/2006/12/november-jobs-report.html