Very interesting NFP report today, with all sorts of cross currents at play. The consensus of Wall Street economists is for the unemployment rate to
remain at 4.6% for August, while Nonfarm payroll growth is seen at 112,000 — marginally
stronger than July’s 92,000.

AdpAs noted yesterday, Back-to-School Sales were surprisingly strong. And credit crunch notwithstanding, the global boom continues. 

Closer to home, things have been murkier. The ADP Employment change was a mere 38k — that has lowered expectations, as have all of the huge layoffs in the mortgage and banking — the Financial sector accounts for about half of the total mass layoffs.

BLS keeps showing an unfathomable construction jobs growth , which I suspect is a function of their wildly-optimistic-guaranteed-to-miss-turning-points Birth/Death Model adjustment. The gross gain last August was 122k jobs; since  it appears to be rather seasonal, we should expect a nice B/D bump this August also.

Considering how much softer the economy has been much in 2007 than last year, it is simply unconscionable that the B/D model has actually created more jobs in 2007 than it created at this point in 2006.

Year    Jan    Feb    Mar    Apr    May    Jun    Jul 
2006   -193    116    135    271    211    175    -57   
2007   -175    118    128    317    203    156    26                        

Hence, we need to consider two factors: today’s reported number, and that ongoing physical construct called reality.

It would not shock me to see an upside surprise in the official reported number today. 120k – 180k is certainly a conceivable outcome from the model. Hell, if BLS’ model can generate data saying construction jobs are growing, than why not even 200-220k new jobs?

The real numbers on the ground are very different. In addition to the punk ADP report, and the massive Challenger layoff numbers, we continue to see other leading employment indicators softening:  The online job listings (showing more people looking for work) and temporary help index. The charts of temp help firms like ManPower (MAN) look pretty awful.  Also, Continuing
unemployment claims
continue to tick higher — the WSJ reported they "hit 2.598 million in the week to Aug. 25, up 5% from a year


The Fed will obviously be watching this data point, but one number is far less significant than the overall trend — and that has been a gradual decrease in new job creation over the past 3 years.   

I’m out of pocket most of the morning, so I may not get a chance to update this until much later today . . .


UPDATE: September 7, 2007 3:15pm

Helluva day to be out of pocket; Dow is off 240 as I type this; Gold is rockin.

A loss of 4,000 jobs — the first negative number in 4 years — pretty much gives the begging/pleading crwod what they want: a very likely 25 bps cut.

Once I get settled, I’ll update payroll and expand on yesterday’s same store sales  data.


Market Spotlight: Staffing Companies
Analysts Forecast Tough Times for Staffing Companies As Housing, Credit Problems Continue
Betsy Vereckey
AP, Thursday September 6, 3:41 pm ET

How Job Report May Be Masking Labor Pains
WSJ, September 7, 2007; Page C1

Category: Data Analysis, Economy, Employment, Federal Reserve

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

38 Responses to “NFP Day”

  1. 12th percentile says:

    Hence, we need to consider two factors: today’s reported number, and that ongoing physical construct called reality.

    thanks for the laugh.

  2. SPECTRE of Deflation says:

    What difference will NFP numbers make on these markets when GS can make $300 million from rescuing one of it’s own Hedgies while outside investors in the fund had their heads handed to them. Effeciant markets…LOL!

    By Steve Goldstein
    Last Update: 2:59 AM ET Sep 7, 2007

    LONDON (MarketWatch) — Goldman Sachs (GS) said it made $300 million last month from the rescue of one of the investment bank’s troubled hedge funds, even as external investors lost more than a fifth of their money, according to a report in the Financial Times. The bank’s Global Equity Opportunities fund, into which it injected $2 billion of its own money, recovered strongly after the rescue but still underperformed badly for August as a whole, the report said.

  3. Owner Earnings says:

    (4,000) print. Shocker! (Only to those who don’t read this and other quality blogs)

  4. dark1p says:

    let’s see, they expected 112,000 and got -4,000. previous months revised a LOT lower (june from 129k to 69k? that’s some margin of error).

    and becky quick just said, ‘one number does not a trend make’.

    ya gotta love ol’ bubblevision. they never stop trying.

  5. michael schunacher says:

    only from the bush administration will you get such a miss on the total amount of jobs “created” and have the unemployment rate stay exactly the same at 4.6%. That has more to do with revising the priors however how do you miss with that much berth and still not affect the overall rate????

    Gotta love that…


  6. W.Edwards says:

    Birth/Death model added 120K jobs so net loss excluding this was 124K, downward revision of June/July figures a cumulative 71K. Oops!

    And “Not in Labor Force” jumped 592K! What a bunch of slackers!! At least it keeps the unemployment rate figure looking good!

  7. KP says:

    You can do it Atreyu, just close your eyes and wish HARDER…..Hurry!! The Nothing is getting closer!!

  8. Ban the Spectre says:

    Spectre, that post was much better. Your comment and a reference to the situation rather than 4 pages of a story lifted from bloomberg. Very good.

  9. W.Edwards says:

    Birth/Death model added 120K jobs so net loss excluding this was 124K, downward revision of June/July figures a cumulative 71K. Oops!

    And “Not in Labor Force” jumped 592K! What a bunch of slackers!! At least it keeps the unemployment rate figure looking good!

  10. Florida says:

    The guests on Bloomberg this morning immediately started saying this number locks in a Fed cut, 100% certainty. I’m thinking that’s quite a reaction to a single data point.

  11. SPECTRE of Deflation says:

    If I gave a rat’s ass regarding your thoughts, I would say thanks. So far, I have seen shit from you other than trying to be a hall monitor for someone else’s site. The piece from Bloomberg was for adults who understand how markets work, and I’m not expecting you to comment on adult issues.

  12. blam says:

    The worst thing the Fed can do now is to lower interest rates in a panic.

    The economy has to return to “that ongoing physical construct called reality”. So far Bernanke seems to agree. There is absolutely no reason to force the economy into a recession but there is also no reason to attempt to sustain the credit bubble.

    Unless capitalism and economics are all wrong, a return to “long term sustainability” is inevitable. The path back is the question. Inflated housing, commodity, equity, and bond prices will trend toward equilibrium economic profits.

    That has always been the message of this blog. Not necessarily bearish, just a less optomistic view of the credit bubble.

    Panic by the Fed and their FCB brothers in crime is the worst move. There may be plenty of time to panic in the future. Why waste bullets saving the terminally wounded when so many more can be saved later in the battle.

  13. Estragon says:

    MS – “how do you miss with that much berth and still not affect the overall rate????”

    Keep in mind that NFP and unemployment are two different surveys (the former being establishments, the latter being households), and both have well discussed “issues”.

    Florida – Agreed. The fed isn’t likely to move just on one number, especially one subject to massive later revision. That said, the storm clouds are gathering and this report adds to the gloom.

  14. Karl Smith says:

    Birth/Death model added 120K jobs so net loss excluding this was 124K, downward revision of June/July figures a cumulative 71K. Oops!

    Its not a “mistake” its just the way the model is built. They are upfront about that and if you understand it you can easily predict the updates. Its their priority to be consistent in methodology rather than accurate.

    Its our job to understand the methodology ant adjust our expectations accordingly.

  15. me says:

    “Its not a “mistake” its just the way the model is built. They are upfront about that and if you understand it you can easily predict the updates. Its their priority to be consistent in methodology rather than accurate.”

    The fact remains that 75% of the “jobs” created this year are by the “model” and not real businesses.

    The Bush jobs machine just rolls on.

    As I have pointed out many times, the last 3 months of jobs created by this administration and their policies are about one-half of one month when Clinton was president.

  16. Pool Shark says:

    An interesting point raised by a poster to NR’s blog:

    With these horrible employment numbers, and 600,000 workers no longer seeking jobs, how many of the first wave of ‘boomers’ will opt for early retirement at age 62 when they first become eligible for benefits in 2008?

    What effect will that have on federal deficits over the next few years?

    Things aren’t looking to good…

  17. Estragon says:

    Karl Smith,

    Maybe I’m misunderstanding the model, but AFAIK the NFP revision stems largely from the inclusion of tardy establishment reports, not the birth/death model. The B/D model gets revised in the annual revision, not the monthly revisions.

    Is this incorrect?

  18. Estragon says:

    Pool Shark,

    I’m not all that concerned about boomers retiring early en masse for two reasons:
    1. Savings rates have been abysmal for some time now. I haven’t seen any recent numbers showing the distribution (i.e. by age/income/net worth), but it’s unlikely that boomers have been uncharacteristically thrifty of late.
    2. Cashing out of home equity is often a major source of retirement savings and income, and we know the story there.

  19. techy2468 says:


    ****As I have pointed out many times, the last 3 months of jobs created by this administration and their policies are about one-half of one month when Clinton was president.***

    are you saying that the jobs created during last 3 moinths are much less than the jobs created during clinton admin….using the current model.

    just as a reminder…we are in a slowdown phase since almost 8 months….while during clinton we were in a boom phase….so there’s bound to be a difference right? please correct me if i am wrong.

  20. W.Edwards says:

    My “oops!” wasn’t in reference to the data revision. I’m aware that it’s a model subject to revisions as more data becomes available. It was more a general comment to those that believe the US economy is generating new jobs at an healthy(?) clip. How accurate the birth/death model adjustment is definitely clouds the whole employment debate. But to have evidence of jobs decline even after the B/D adjustment, we’re into a whole new ballgame!

  21. Commodity Trader says:

    Blam nailed it on the head. I add that the Fed has TWO missions:
    1. ensure sustainable economic growth, and
    2. ensure price stability.

    Re 1., economic growth based on an asset bubble (be it or housing) is not sustainable. In 2001-2003 the Fed’s preventing of the effects of one bubble bursting created an even worst one.

    Re 2., gold vigilantes have been sending a clear message lately. Yesterday’s gold rise looks like Don Corleone placing a horse’s head under Bernanke’s bedspread.
    Of course, gold is just the tip of the iceberg. See what oil, wheat and milk have been doing and tell me: what price stability?

    Unless they want to starve the poor, of course. After all, they might agree with Michael Lewis of Bloomberg that they are sharks. (Hat tip to Calculated Risk).

  22. Pool Shark says:


    You emphasize two points which will only exacerbate the problem:

    1) If boomers haven’t been too ‘thrifty’ of late (I agree btw), then they have been spending and contributing to all the ‘bubbles’ we see. Upon retirement, that spending will necessarily slow down; which doesn’t bode well for the economy. Additionally, retiring boomers will stop puting money into the markets, and instead begin withdrawing money and liquidating assets to live on; which doesn’t bode well for the markets.

    2) If the retiring boomers are relying on MEW, they’re in a bind. Where will the source of their spending come from? See number 1 above.

    In either case, the ensuing “hunt for liquidity” by retiring boomers, the slowdown in spending, and the increase in SS benefits paid out by the feds is looking like a future of slowing growth (or negative growth) and higher federal budget deficits.

  23. joe master says:

    It’s really hard for me to believe that no one out there can see what has been happening for a week or two now. The puppet master has been pulling the strings. Looks to me like when Ben met with the president and his team, the pres. asked Ben what he needed to see for the fed to lower the rates and Ben said we need to see some bad numbers, like a bad jobs number. So, the President said NO PROBLEM! And here we are looking at a bad number plus they did us one better and lowered the last two months so the fed won’t ask to see a trend before lowering the rate, the trend has been set! bingo bango! I guess the real question should be “why are these numbers getting revised to the extent that they are???” Are the people putting these numbers together that wrong every month? How can we trust any number if it’s only going to get revised up or down the month after? Sounds like revisions happen because the gov. wants to pull the strings in which ever direction they see fit. A rate cut WILL happen. Not because it’s the right thing to do, but because the gov. wants it to happen!

  24. Estragon says:

    Pool shark,

    I was commenting on your original thought that boomers would take early retirement en masse. The factors I noted suggest they’re more likely to work well into retirement.

    Adding to your litany of woes regarding liquidation of savings, I’d point to Japan. Savings there have been a major source of funds for US lack of thrift, and Japan’s demographics are worse and more immediate problems than in the US.

  25. techy2468 says:

    I am not against rate cut, unless some one lists actual problems economy may face due to it.

    only bad effect of rate cut is inflation….but if that means we ward off recession…i dont mind inflation.

    dollar may decline…but i have my doubts…since no one wants to appreciate too much against the dollar anymore…since they are already hurting. I beleive that all central bankers are going to intervene such that their currency does not appreciate more than 5% from current level.

    so in other words rate cut is only bad news for people who are locked in cash…

    please tell me i am wrong.

    my logic is that consumers are debtors…but we need them to support our growth…hence all the exporters maybe willing to take the loss to support US consumers (india, china and other exporting countries are already doing that).

    no one is a winner if US goes into recession (except maybe russia’s politicians) and the only way out of recession maybe inflation(or more debt at cheap rates) to reduce the debt load of US consumers.

  26. Bit of humour says:

    Joe Master, you can always make up a conspiracy theory. Here’s a better one, to try to shore up mood a bit.

    Months have passed and the housing situation keeps getting worse. At a White House cabinet meeting:

    Bush: Professor Bernanke, why is the housing situation getting worse with more and more foreclosures?

    Ben: Because most ARMs use the LIBOR rate and it has kept rising.

    Bush: And why has it kept rising if you have lowered the Fed Funds rate?

    Ben: Because it reflects credit conditions in London, outside of the reach of the Fed.

    Bush: NO PROBLEM then. (Addressing Robert Gates:) Bob, have the Pentagon make plans for Operation British Freedom ASAP.

  27. Gary says:

    Regarding the comments about boomers….
    I’m a boomer. Trust me, most of us can’t afford to retire. It’s just about to the point where we’ll work for health care benefits. We may draw what little pension we get and some of us may start SS early, but we’re gonna keep working and try not to pull out the retirement dollars (IRA, 401K, etc) until we have to.

    As for for doing an equity draw, that doesn’t make a lot of sense. What does is trying to sell the home and buying a less expensive one with the proceeds so there’s no mortgage to carry.

    And though we haven’t been quite as thrifty as we should, we’re better off than the generations coming behind us. At least from what I’ve read. When Gen x keeps cashing out their 401k’s instead of rolling them and Gen y enters the job market with thousands in credit card debt, boomers don’t look quite so bad IMO.

  28. joe master says:

    funny stuff Bit, hey if the round peg fits in the round hole…., no conspiracy theory, i was there. They gave me a few bricks of gold and told me to hold on!

  29. Karl Smith says:

    Maybe I’m misunderstanding the model, but AFAIK the NFP revision stems largely from the inclusion of tardy establishment reports, not the birth/death model. The B/D model gets revised in the annual revision, not the monthly revisions.

    Thats right but the B/D methodology does not distinguish between a company that has died and one that is simply delinquent on reporting.

    My understanding is that if a higher fraction of missing companies are dead than expected then the B/D estimate will be too low.

    Once the sample collection process is complete and it is confirmed that those business are indeed “dead” the overall estimate will be revised downward, not the B/D estimate.

  30. KP says:

    Gary you’re comments jive with what I am seeing around me. Reckless spending started with the boomers….but it ain’t going to end with them. People have gotten complacent, then delusional about the state of their financial realities and I am fearful that serious pain(maybe even the d word) is the only thing that will produce the “moment of clarity” that the masses desperately need.

  31. Groty says:

    Sometimes panic is the appropriate response.

  32. Greg0658 says:

    I see an influx of retirees from global centers MEWing out of the area that brought their wages into smaller communities.

    This brings growth but problems to these small areas. TIFs (tax incentive financing) are a big player in subdivision growth. Another story in itself.

    These actions sucks up farm land, and the influx increases taxes to families that never had the benefit of high scale wage jobs that international trade centers provide.

    These retirees want burgers fliped for them, but the burger flippers see the houses they live in and say, when and how am I gonna see that.

  33. Estragon says:

    Karl Smith,

    I see. I do wonder though if the proprietors of the “dead” establishments actually report their demise. Maybe instead they’re in bars cursing the time they spent filling out forms for the government instead of running their business ;-)

  34. Howard Veit says:

    I posted this today: Moron Report:
    Wall Street shocked over jobs report. Are we kidding? These Ph.D. jerkoffs watched the meltdown in the construction business and didn’t think the jobs report would show it? I think the wheels are coming off our entire leadership class in every area of the country from A thru W; Academia through Wall Street, especially including our political and pundit classes. Next they’ll all find out that fire is hot. OMFG, then what?

    And and and, as I reported to you over and over again, the main culprits are the spec housing buyers; the home “flippers” whose default rate is….
    Analysts said the problems in the formerly red-hot housing markets of California, Florida, Nevada and Arizona reflected, in part, speculators walking away from mortgages they can no longer afford. They had jumped into the market during the boom, hoping to take advantage of rapidly rising prices by quickly reselling.

    But now, with the inventory of unsold homes at record levels, many speculators are defaulting on their mortgages. Those defaults are dumping more homes on an already glutted market.

    Also as I’ve been telling you, the rating agencies have been misstating the bond quality. This AM it is finally reported that AAA bonds are defaulting. AAA bonds cannot possibly default; a misrated AAA bond, one that is actually a bb bond, defaults.

    Call your bank? More and more homeowners and speculators are finding out that their “bank” is a hedge fund, it is the hedge funds that are holding the paper. Talk to your hedge fund? Ho ho that’s rich.

  35. me says:

    “are you saying that the jobs created during last 3 months are much less than the jobs created during Clinton admin….using the current model.”

    No, I’m saying I had a job under Clinton and lost it under Bush and it hasn’t been replaced because THERE AREN’T ANY JOBS>

    As for a slowdown, all I have heard is this is the best economy ever, the tax cuts for the rich had made boom time, profits are at record levels.

    Um, and yes, it is the same BLS department that reported jobs under Clinton, under Reagen, not under Bush 1 and pretending to add jobs under Bush 2.

    You don’t need to believe me or the BLS, just understand that the 2/3 of the people that think the country is or is going into recession are correct.

    So yes, there were real jobs created under Clinton with a high participation rate. And now, the only jobs being created are in India and Brazil as IBM, HP, Dell, Intel move hundreds of thousands jobs offshore.

  36. Pool Shark says:

    Estragon and Gary,

    My comments relating to early retirement of boomers, was specifically in regard to those who were a part of the 600,000 who just left the workforce (whether voluntarily or involuntarily).

    The question was whether those who were still willing to work, but unable to find work would opt for early (age 62) SS benefits instead.

    Gary, I presume that those boomers who are age 62 and still gainfully employed would of course opt to defer filing for SS benefits. I was refering only to those who are turning 62, are unemployed and have no other choice but to collect SS.

    All I was saying was that given the likelihood of an imminent recession, how many laid-off boomers approaching age 62 will be filing for early SS benefits because they cannot find work, and how would that affect near future budget deficits?

  37. Winston Munn says:

    Growth=adding value

    The method we chose to estimate growth (added value) is consumption. If debt is rising faster than value is added, growth is unsustainable. If this condition occurs, then any productivity number cannot be accurate without modifying for future productivity spent.

    Falling real jobs puts further pressure on repayment of future productivity, creating more need for debt, ….leading to zero or negative real growth, leading to more pressure on jobs, leading to….

    The viscious debt-driven recession spiral.

  38. >When Gen x keeps cashing out their 401k’s instead of rolling them< Some of us are trying, I swear to God we are. Unfortunately, we’re getting squeezed hard in the job market in both directions. Competing in the low and midrange with Indians and Eastern Europeans who can live like kings on $12/hr, and having a hell of a time moving up the ladder in part because the damn boomers won’t retire. Meanwhile we’ve still got 100k in student loans to pay off, and buying a starter home for our family anywhere within driving distance of our job costs 700k (thank you Easy Al!) Hopefully we can start replenshing the retirement funds soon, but if not, at least I know those FICA withdrawals I’ve been paying all these years will help cover me when I’m too old to work. Oh no, wait – another Ponzi scheme that will expire with the Boomers. Social Security currently scheduled to run out of money the year I hit 65. Sweet. I’d stay to chat, but I gotta get back to my second job managing graveyard shift for an Indian call center.