We get the Non Farm Payrolls report today. Expectations are for an increase in NFP to rise 165,000, following April’s gains of 244,000.

But there is an unusual amount of hair on that number, as I shall explain shortly. Indeed, today is an unusually unusual NFP report.

For one thing, the economy’s growth rate is slowing. As we saw last year, this can generate a significant over-reaction amongst traders. Every weak data point is a double dip; every soft number heralds the next recession. So as the world’s economy cools, economists are left to grapple with questions they cannot answer prospectively. Are businesses slowing hiring to restrain labor costs? Are executives losing confidence? Is consumer spending slowing?

For another thing, the markets seem to be unusually twitchy lately, with the Dow up 140 points on Tuesday, and down 280 points on Wednesday.

Then there is the ADP private payroll number. It was enormously disappointing. But as we noted yesterday, ADP’s job data reliability is not especially great. Indeed, given their large firm bias, I would expect it to less than ideal during the early portions of the economic cycle, when job creation is driven by start ups and smaller firms.

Lastly, there are some twitchy technical factors that will make this months NFP number a challenge to dissect. The big 244k April number involved a 5 week month. The way BLS picks this up may have caused April to steal some thunder from May.

Then there is the Birth Death number. On a calendar basis, it has been huge in May. Last May, the B/D adjustment added 192,000 jobs tot he 143 million total.

I have been critical of a major flaw of the B/D adjustment — it tends to dramatically overstate job creation late in the economic cycle (think 2005-07). But its purpose is to compensate for the Establishment Survey’s big firm bias. Like ADP, it tends to understate job creation in the recovery portion of the cycle.

Finally, there is the crapshoot of how traders will view the employment report. Is bad good because it could induce more Fed intervention? Is good really bad because it postpones QE3?

~~~

BLS report is out at 8:30 am

Category: Employment

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.

9 Responses to “An Unusually Unusual NFP Payroll Day!”

  1. [...] Barry’s employment numbers preview is must-read:  (TBP) [...]

  2. Out Of Nowhere, The NFIB Just Sent Out This Warning: “Job Creation On Main Street Has Collapsed” read.bi/ku7PNL

  3. b_thunder says:

    don’t forget the “McJobs” – all 62k of them!

  4. dead hobo says:

    Even cynical old me was surprised by that one. I was expecting 62000 McJobs, a B/D adjustment of 175000 or more , and a smattering of real jobs. I was expecting a blowout to the top. Jesus, what do you think the real number is if the official number is so low?

    Fortunately for stocks, commodities are holding their own, signifying that the recovery story is still intact due to huge end user demand that will show up next month in the official numbers, and S&P 1450 or more is ahead by end of year. No reason to sell today.

  5. mark says:

    B/D added 206k to the non-seasonally adjusted total (which was +682k).

    As for the NFIB, CalculatedRisk often points out that NFIB has a strong real estate bias (small construction firms, home repair/remodeling, landscape etc I suppose). He seems to discount the continuing negativity of the NFIB survey for this reason since real estate is clearly the sickest part of the economy. If he’s right then the warning from the NFIB shouldn’t be “out of nowhere” since there have lots of signs of renewed weakness in real estate. Comments?

  6. BR,

    awhile back you did post about ~”the cycle of (News/Life) on Wall St.”

    Can you recall it?

    ~~

    in other Newz, on CNBS, Swonk y Zandi have answered their ‘Curtain Calls’, yet again..

    ~~

    as an aside, it’s *funny that Dorothy was knocked unconscious when the Winds blew the “Window-Frame” in …

    ref: The Wizard of Oz (thx Frank)

    http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=The+Wizard+of+Oz

  7. PrahaPartizan says:

    Dead Hobo, I’m waiting to see what happens when the empty suits in the corporate suites begin to wield their axes so they guarantee their bonus packages for the year. Robust (mea culpa, I use the world relatively) hiring in the beginning of the year with the prospect of good economic growth collides with collapsing economic growth in the last half of the year through the heavy-handed use of hiring freezes (if the downturn is considered “mild”) or extensive lay-offs (if growth is “troubling”). We don’t even need to see an official recession for this to happen. If the last half of 2011 sees growth at only the 1% level, let loose the dogs of staff reductions. It’s the only way to have a shot at making the bonuses, which are the only things that matter these days.

  8. dead hobo says:

    PrahaPartizan Says:
    June 3rd, 2011 at 9:32 am

    Dead Hobo, I’m waiting to see what happens when the empty suits in the corporate suites begin to wield their axes so they guarantee their bonus packages for the year. … It’s the only way to have a shot at making the bonuses, which are the only things that matter these days.

    reply:
    ———-
    Things are going to look pretty sick in the coming months. I strongly believe 2012 Wall Street bonus pools will be fed by a QE3 initiative, but a lot of misery and market tumult will be encountered before QE3 is hinted at or started. Markets have to fall substantially, including and especially commodities, before QE3 can begin.

    I believe the Fed started QE to help the economy, but its view includes bank capitalization via QE and market trading profits for TBTF banks. If you or I were to transfer money this way, it would be money laundering. To the Fed, it is monetary policy and stimulus. This will happen again after a bottom of some kind is reached, although the form might be a little different from QE1/QE2. It will likely be as clumsy as the past stimulus and have no effect except to transfer cash to those who understand this new liquidity cycle and stop confusing it with Investment Science cycles that are the basis of textbooks. The result of no QE3 will be serious financial woes at TBTF banks. Te Fed has its back to the wall and this is clear if you think long term.

    The liquidity cycle I refer to is based on my recent observations of liquidity * animal spirits * volume specify up or down longish term market trends. Right now we have high liquidity, acceptable volume, but dismal animal spirits. You do the math.

  9. John Clarke says:

    “…the markets seem to be Unusually Twitchy Lately, with the Dow up 140 points on Tuesday, and down 280 points on Wednesday…”.
    In my view totally expected for markets acting like a crack addict begging for another hit of crack cocaine. Leading indicators anymore?? I don’t think so. Who couldn’t see a softening patch coming in the world economies thanks to central bank commodity induced inflation due to excessive amounts of liquidity and bailouts. These markets react anymore only when they’re hit repeatedly in the face with bad economic data.. and then the analysis becomes somewhat as you stated above…
    “…Is bad good because it could induce more Fed intervention? Is good really bad because it postpones QE3?…”
    I don’t want to see anymore “Fed Intervention” at this point. (Let the chips fall where they may). But that’s precisely what these Markets are wating for… just another round of stimulus and/or bailouts –QE3– in some form or another– Tax Holiday, changes to the Corporate Tax Rate, whatever.
    If Bernanke and his fellow Wall Street Suckups at the Fed can show a little common sense maybe he’ll let food and energy prices soften a bit (along with Global Equity Markets…) before starting another round of ill advised stimulus.