Once again, with feeling:

The most over-analyzed, over-emphasized, least-understood data point of the month comes out today. I guess we could probably add “over-traded” to that list.

Why do am I critical of how we discuss this point?

Consider these reasons:

1) The overall trend in hiring is what matters, not a single snapshot

2) In a Labor Force of 140,000,000 people, the change in net monthly hires minus fires is a miniscule one tenth of one percent. (i.e., 140k out of 140m)

3) If you use the correct long term hiring cycles, you cans get a pretty good estimate of likely hiring patterns. Following credit crises, we should expect a mediocre but improving job creation.

4) The overall NFP number is subject to heavy revisions as new data becomes available; hence, the preliminary number is unreliable.

5) Like all models, the BLS model is flawed, but not useless. That is why we prefer to look at the overall trend versus any specific datapoint (That also eliminates the Recency Effect).

6) While Hiring is a lagging indicator, we can look at the 3 leading components each month to see if we are improving or backsliding: Hours Worked, Wages, Temp Help.

Okay, let’s take a quick look at the numbers:

Consensus estimates for Payrolls are to see gains of 146,000 workers versus December’s +103,000 (Bloomberg survey). The economists also expect the jobless rate to rise one tick to 9.5%.

~~~

BLS data released at 8:30am

http://www.bls.gov/ces/

Category: Data Analysis, Employment, Philosophy

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.

45 Responses to “NFP Day: The Most Over-Analyzed, Over-Emphasized, Least-Understood Data Point”

  1. Ouch!

    36,000 net jobs

    I said Mediocre, but
    that’s fugly !

  2. rktbrkr says:

    only 36K but rate went down .4, time to rally on…not many new jobs BUT people are throwing in the towel in their job search, another 4% abandon looking for a job and we will have our recovery!

  3. Transor Z says:

    Birth Death Adjustment model is being revised eff. Feb. 4, 2011.
    http://www.bls.gov/cps/duration.htm

    And shocker, BLS validates something I pointed out almost exactly a year ago:
    http://www.scribd.com/doc/26493859/Is-the-Duration-of-the-Current-Recession-Distorting-U3

    and now admits that U3 has gotten seriously distorted due to the duration of the downturn. However, the adjustment will only be prospective, so this is “too little too late” to get an accurate fix on where we are currently.

    To whom should I send my invoice at BLS?

  4. epupo says:

    The best part is…..we are rallying in the futures? HUH?

    I guess this might guarantee QE3, or maybe people feel like we can’t top on bad news?

  5. Stuart says:

    Check out the all important 64.2 participation rate. Hey, BLS! Lets get this down to below 60 and I’m sure you can get the U-3 rate to below 6%. Yes, sarcasm. Any commentator or analyst that downplays or ignores this drop in employment participation deserves to be ignored too. The U-6 is a better indicator of employment stress in the labor market.

  6. curbyourrisk says:

    LIES LIES LIES LIES LIES LIES
    LIES LIES LIES LIES LIES LIES
    LIES LIES LIES LIES LIES LIES
    LIES LIES LIES LIES LIES LIES
    LIES LIES LIES LIES LIES LIES
    LIES LIES LIES LIES LIES LIES
    LIES LIES LIES LIES LIES LIES
    LIES LIES LIES LIES LIES LIES

    tHIS HAS GOT TO BE ONE OF THE MOST EMBARASSING DAYS FOR OUR GOVERNMENT. We have finally reached the point where truth does not matter……all that matters is Obama looks good. I know NO ONE who got hired lately. This is blantant bullshit and I call out Ben Bernanke to answer to questions.

    We have gone way past a banana-republic. We are now a donkey-republic.

  7. curbyourrisk

    That is a bizarre comment, this is considered a pretty punk payroll report.

    If they were going to LIE it would have been 212,000, not 36k

  8. contrabandista13 says:

    WHY…..? WHY….? Shaking my fist toward heaven……..

    I needed a good rally to fade and I only got 3 lots off on my scale pre announcement….. Now we’re going to have Ben bending over for the market until next week….

    Econolicious

  9. AHodge says:

    payroll bad but not real bad
    the 40+ down in messengers after up last month is an oddball
    the jobless rate is news
    ellen Zentner got that right
    my extra tip puts and other bond short actually a little ahead so far

  10. DeDude says:

    A lot of boomers dropping out of the labor force earlier than expected. Good for U3 but problem for long-term economic growth.

  11. call me ahab says:

    curbyourrisk-

    dude- I am lost on your post- what lies? The 36K print, the 9% UE rate?

  12. rktbrkr says:

    CNN “expert” says the unemployed have to “be patient”. Thats quite a message to give people who have already been out of work a long long time.

    There are an awful lot of people who are too young to retire but “too old” to find work consistent with their education and experience who have been out of work a long time and will likely never find a “real job” in this environment, this will cast a pall over the country for a long time in a much broader sense than just the unemployment calculation. The number of people receiving food stamps continues to grow even after recovery has been declared.

    This country needs to find a way to utilize the talents of all it’s citizens, even the unemployable over 40. I’m sure employers shun older workers to avoid health care and other age & seniority benefits. Some sort of national health care system is necessary to end this disposable employee approach.

  13. Julia Chestnut says:

    The best part is to hear them talk about how this number isn’t that bad — I mean, the weather last month was terrible! That was the problem. And look — the unemployment number went down a lot!

    The terrible number plus the high drop in “unemployment” combined show a further slowdown, because out of work people got discouraged and gave up. They don’t give up when they see things getting better.

    It’s a bad number, and I’m sick of the spin. I completely agree with the concept of looking at the trend line, but I would add to that a look at the types of jobs being added, who gains from the trends in employment and who are the losers. And while the overall trend is going (generally) up on a very light slope, the underlying trends in job creation tell the story of an economy permanently shifting downwards and failing to realize huge numbers of people’s potential and also failing to provide them satisfying, decent-paying work.

  14. Robespierre says:

    @Barry
    “6) While Hiring is a lagging indicator,”

    I’ve been listening to this gospel for about 2 years or so. There comes a moment when you must come to terms and realize that this is a current indicator and not a lagging one. Unless of course we now think that and indicator that lags more than 7-8 years (my guesstimate of how long will it take to recover to normal) is actually an indicator of anything

  15. call me ahab says:

    Julia-

    first tip of the day- THEY DON’T CARE . . .it’s irrelevant to their world view-

    they’re going to spin it- even if it is saying- see folks . . .at this rate- as can be seen by the chart everyone will be back to work in 30 years-

    won’t be alive then? perfect

  16. tagyoureit says:

    Molasses in January.

  17. franklin411 says:

    @Julia:
    Yep, let’s look at who’s adding jobs: Manufacturing and retail. Manufacturing employment is growing by leaps and bounds–something we haven’t seen in almost 20 years. No nation can enjoy sustainable prosperity unless it is a manufacturing nation, and we’re starting to see factories *opening up* in the US for the first time. Retail employment–not the best kinds of jobs, but let’s face it. We need consumption now to keep our heads above water while we scrap the failed Reagan idea that based an entire economic policy on looting our factories by selling them to the Asians. Yes, Mr. Bush…it does, in fact, matter if an economy produces potato chips vs computer chips.

    @Curb
    I have a good friend who recently found employment at a prominent medical device maker. He got super-wingnut while he was looking for work, and I correctly deduced that it was merely an expression of his frustration about unemployment. Well, he’s making $65k base salary (this is his first job out of college, mind you) plus $20k in signing bonus, 1 month of relocation assistance, medical, retirement, etc…

    The problem is we need to do something with people who were employed in “fake” industries like homebuilding and the financial services sector. The financial services sector in particular is a leech that destroys GDP, not adds to it. I would be happy as a clam to see everyone and everyone who works in financial services jobless, homeless, and familyless. It’s better for the nation as a whole if these people are utterly destroyed and forced to rebuild their lives around real work.

  18. call me ahab says:

    BR-

    sorry dude- didn’t see your 8:49 post as it was above the top of my screen, my 9:16 becomes redundant, sort of. Possibly, we don’t know what lies he means . . .

  19. Irwin Fletcher says:

    rktbrkr,
    Do you have any facts to back your claim that employers shun older workers for the reasons you set forth?
    My information shows the just the opposite to be true. Baby boomers are getting jobs at a higher rate than any other segment of the population, and taking part time work that otherwise might go to youth. Employers a general rule are attracted to the over 40 crowd.

  20. call me ahab says:

    rebuild their lives around real work.

    work that requires a hammer and sickle I imagine (maybe we need a jobs Czar that tells people exactly what job they can do . . .)

    and remember- the government is your best friend

  21. franklin411 says:

    @Ahab
    Yep. The people’s Kommisar has decided that the glorious ideology of Adam Smith shall be the policy of this land. Henceforth, the American soviet will generate wealth by making goods and selling them to the world. We must end forever the freedom-loving idea that a nation can sustain itself by borrowing wads of paper from China, folding it over twice, and using it to create employment for Pakistanis.

    Give me some of that old time Adam Smith religion!

  22. Robespierre says:

    @franklin411 Says:

    ” Well, he’s making $65k base salary (this is his first job out of college, mind you) plus $20k in signing bonus, 1 month of relocation assistance, medical, retirement, etc…”

    Another meaningless “data point” unless you specify what part of the country your friend is relocating to. Is it Silicon Valley or is it Huntsville Alabama? Also have you consider that perhaps your spanking new worker (new college graduate) may be replacing a guy (gal?) in his/her late 40sh who was probably making > $100K for the same job? Also retirement as in pension or as in 401k?

  23. franklin411 says:

    @Robe
    His new job is in the Bay Area, but he also had offers in St. Paul and Los Angeles. Actually, the St. Paul offer was better on paper, but the problem was that for all of his right-wing rhetoric, he was terribly uncomfortable with the idea of living anywhere near teabagger country. He’s a Sikh and you know what the teabagger types did to Sikhs after 9/11. That’s how I knew he wasn’t a real wingnut!

    I don’t think he replaced anyone–it’s medical devices and they’re growing by leaps and bounds. In fact, they recruited him. They sent a recruiter down to his campus in Southern CA, they flew him up, they paid for everything, including a free month of hotel housing!

  24. Transor Z says:

    I would be happy as a clam to see everyone and everyone who works in financial services jobless, homeless, and familyless. It’s better for the nation as a whole if these people are utterly destroyed and forced to rebuild their lives around real work.

    Yeah, that’s a mature comment.

  25. Robespierre says:

    @franklin411 Says:

    “In fact, they recruited him. They sent a recruiter down to his campus in Southern CA, they flew him up, they paid for everything, including a free month of hotel housing!”

    I’m assuming this is an R&D position. If that is the case, salary and all the perks you mention are very much standard for the industry. Now, compare that with new graduates going into the financial industry and you will see that very little has changed…

  26. Kort says:

    What did the teabagger “types” do to the Sikhs after 9/11?

    Teabagger “types” are for smaller federal government and less taxes, and SOME control in federal spending.

    If you get all your news off soundbites on Fox or MSNBC, then yeah, I guess everybody else is crazy and “doing” things to the Sikhs…

  27. rootless says:

    @franklin411:

    Although I didn’t know that there was a cluster of tea-baggers around St. Paul, what is it with you and your discriminating talk against tea-baggers and what they allegedly have done to Sikhs? I’m pretty sure that whatever tea-baggers did with Sikhs was consensual most times. And the fraction of the ones who didn’t is very probably not higher than for any other group.

  28. rip says:

    @ Frankie: Wow! 65k in SF? That’s a top drawer job. With that he can afford to live in the valley and commute. Or maybe he should apply for a union janitor’s job in the city.

    You are such a Democrat/Obama tool. Nice to see you’re still alive and stirring the pot.

    Just pick a better point.

  29. DeDude says:

    “Teabagger “types” are for smaller federal government and less taxes, and SOME control in federal spending”

    Let me correct that.

    Teabagger “types” are for smaller federal government and less taxes, and control in SOME federal spending (that which benefit “them there other kinds of people”) – and when the numbers don’t add up they are in favor of just ignoring it.

  30. [...] Barry Ritholtz explained this morning, the monthly number is subject to heavy revisions, and what you should be really be looking at is [...]

  31. Petey Wheatstraw says:

    rootless:

    Sikhs wear turbans and beards. What other evidence would one need to come to the conclusion that they are obviously Muslim terrorists, hell bent on imposing Sharia law on US Christians?

    Facts are useless when one’s entire world view is filtered through the emotional lens of of fear-based xenophobia.

    That said, I have yet to hear a cogent political or economic idea expressed by the Tea Party faction of the extreme right wing.

  32. rktbrkr says:

    Irwin Fletcher,
    You offer no facts supporting your opinion contrary to mine. You got a Chamber of Commerce type report to offer up or something?

    There have been plenty of news reports on the problems faced by older workers finding jobs.

    A friend of mine who is an executive at a utility was advised not to “bring in anyone with gray hair” by her HR department, we were amazed by the directness of the hiring bias – by HR no less. We had a good laugh substituting code words for other minority type workers. She was trying to hire professionals and she always had vacancies because the younger applicants didn’t consider the work environment dynamic enough and HR made it difficult for her to hire older workers. The only way she could fill the positions was to hire older workers on a contract basis without benefits. Of course there is an unmeasurable cost associated with this turnstile fix but the employer ducked the measurable benefits costs.

    In third world countries most people lucky enough to be working have contact type jobs without benefits, I hope thats not our future here.

  33. rootless says:

    @Petey Wheatstraw:

    “Sikhs wear turbans and beards. What other evidence would one need to come to the conclusion that they are obviously Muslim terrorists, hell bent on imposing Sharia law on US Christians?” etc.

    What’s your point? How does this provide a justification for denigrating talk against tea baggers? What comes next? Vilifying talk against friends of cunninglingus by suggesting that those show a tendency to be arsonists?

  34. Transor Z says:

    The U data skews way young. Scales from something like 14-16% for youngest cohort to only 6% for older IIRC. See BLS Obviously varies somewhat by sector as well.

  35. ashpelham2 says:

    Wow, a lot of pushing and shoving about what has been to done to one group or another in this country. Can we let the bigotist retoric drop for a bit people? Have a mature discussion without calling names or making fun of people’s beards? If you want to make fun of someone, make fun of my friend James Francos’ new moustache…..

    Anyway, I was stunned by the drop in unemployment. If it really is people leaving the job market, and if that trend continues down for another six months, I can see another steep recession in our mid-term (2-5 years) future. Any thoughts on this?

    The weather is becoming a drag on the economy I think as well. In the past, I’d have told people who spout the weather’s affect on the economy to shove it. But this has been going on for a bit now, and it’s starting to screw things up. Been a solild 3 months now, a full quarter, or one storm after another throughout the eastern 2/3 of this nation.

  36. Jojo says:

    The unemployment rate dropped to 9.0% NOT because out-of-work people had found new jobs, but because the government statisticians continue to remove people from the unemployed count.

    From the excerpt below, _2.8 MILLION_ out-of-work people ARE NOT BEING COUNTED as unemployed because the statistical sample stated that they had not looked for work in the last 4 weeks.

    The government (from Table A http://www.bls.gov/news.release/empsit.a.htm ) is now claiming that in a labor force of 153,186,000, 13,863,000 people are unemployed (which if you divide out, is where the 9,0% unemployed number comes from).

    But if you were to add in the 2.8 million people that the government eliminates from the unemployed count, that 13,863,000 number would rise to 16,663,000 total unemployed. That would give an unemployed rate of 10.9%! That is double digit unemployment which no one in the government wants to tout nearly 18 months after the official end of the recession. SO they try to reduce the number by removing people from the count. Jeez.

    ===========
    From http://www.bls.gov

    In January, 2.8 million persons were marginally attached to the labor
    force, up from 2.5 million a year earlier. (These data are not
    seasonally adjusted.) These individuals were not in the labor force,
    wanted and were available for work, and had looked for a job sometime
    in the prior 12 months. They were not counted as unemployed because
    they had not searched for work in the 4 weeks preceding the survey.
    (See table A-16.)

    Among the marginally attached, there were 1.0 million discouraged
    workers in January, about the same as a year earlier. (These data are
    not seasonally adjusted.) Discouraged workers are persons not
    currently looking for work because they believe no jobs are available
    for them. The remaining 1.8 million persons marginally attached to the
    labor force had not searched for work in the 4 weeks preceding the
    survey for reasons such as school attendance or family
    responsibilities. (See table A-16.)
    ===========

  37. Jojo says:

    Robert Reich
    The Jobs Report, and America’s Two Economies
    Friday, February 4, 2011

    At a time when corporate profits are through the roof, the Dow is flirting with 12,000, Wall Street paychecks are fat again, and big corporations are sitting on more than $1 trillion in cash, you’d expect jobs be coming back. But you’d be wrong.

    The U.S. economy added just 36,000 jobs in January, according to today’s report from the Bureau of Labor Statistics. Remember, 125,000 are needed just to keep up with the increase in the population of Americans wanting and needing work. And 300,000 a month are needed — continuously, for five years — if we’re to get back to anything like the employment we had before the Great Recession.

    In other words, today’s employment report should be sending alarm bells all over official Washington. Granted, unusually bad weather may have accounted for some of the reluctance of employers to hire in January. But even considering the weather, the economy is still terribly sick. (Technical note: The official rate of unemployment fell to 9 percent from 9.4 percent, but that’s because more workers have left the labor market, too discouraged to continue looking for work. The official rate reflects how many people are actively looking for work.)

    We have two economies. The first is in recovery. The second remains in a continuous depression.

    http://robertreich.org/post/3105991636

  38. Petey Wheatstraw says:

    ashpelham2 Says:

    “I can see another steep recession in our mid-term (2-5 years) future. Any thoughts on this?”

    A steep recession in the middle of a depression. Nice.

    The weather can be expensive, but at least that money circulates. Lots of workers, lots of trucks, lots of chemicals, lots of shovels, snow-blowers, and car washes. Better than bailing out banks.

  39. rktbrkr says:

    The gummint is gaming the unemployment numbers and they’ll continue to game them until we have a recovery

  40. Rondy K. Smith says:

    So, the spin is that it was weather that caused the 36k.

    I wonder, was it snowing and sleeting online?:

    http://anasdaq.econoday.com/byshoweventfull.asp?fid=446897&cust=nasdaq&year=2011#top

  41. rktbrkr says:

    Monster chalks it up to seasonality, their headline compares year to year not MTM, the most interesting part of their report is the -21% in gummint ads.

    Don’t know why we’re still running military recruiting ads – maybe we’re planning to impose democracy on Egypt next

  42. sbhatta says:

    What confused me about the Employment Report was that the ISM Manufacturing and Non-Manufacturing results this week were very healthy, both with very positive employment components. Any thoughts on the lack of follow through into the Payrolls result? I understand that the ISM Non-Manufacturing is a good predictor for Payrolls in particular.