Yesterday’s unreliable ADP employment report helped to ignite a rally in equities. If you understand what various Payroll Levels means, one hopes that other factors were on traders’ minds.

The ADP data — 130,000 private sector jobs added in June — was hardly encouraging. But it did manage to beat rather low 105k consensus for what BLS might look like today. Call it the “Soft prejudice of low expectations.”

Understand this much about the US Labor Market: In a nation of 307 million people with a ~145 million people working, it takes about 150k per month of new hires to merely tread water. That means adding new workers at the growth rate of 1% per year, a touch less than 0.1% per month just to keep up with population growth. From Immigrants to college graduates to people simply returning to the labor market, the Labor Pool increases each and every month. Just to hold the percentage of Employed people steady, to maintain the Unemployment rate as flat requires that many new jobs.

Let’s assume the ADP report is correct: 130k private sector jobs in June. We have seen a drop in government workers — at both the Federal level, and at state levels, as teachers, cops, librarians, etc. get laid off. That is how we end up with a 105k consensus for BLS.

Thus, if employers added more workers in June than in May, its an improvement — but just barely. The next likely assumption from the dismal set will be that the weak but improving number indicates second half revivial.

I am less than convinced of that. The typical post credit-crisis weak job market is my baseline expectation. We need a few months of 200k+ job creation to be convinced that a significant improvement is taking place . . .

Category: Data Analysis, 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.

19 Responses to “NFP: Soft Prejudice of Low Expectations”

  1. [...] Barry on how to interpret today’s June NFP number.  (TBP) [...]

  2. Casual_Observer says:

    Well, that debate is now moot. Absolutely terrible is the only appellation that can apply to today’s report.

  3. Kort says:

    Only 18,000 jobs created. Rate up to 9.2%, up from 9.1%

    “Nonfarm payroll employment was essentially unchanged in June (+18,000), and the
    unemployment rate was little changed at 9.2 percent, the U.S. Bureau of Labor
    Statistics reported today. Employment in most major private-sector industries
    changed little over the month. Government employment continued to trend down.”

  4. AHodge says:

    Ughh vacation time
    not much redeeming here
    its mainly broken finance
    but also the permanent election and Rs convincing their small bus buddies things are awful
    is part of the story,
    new economic strategy,
    if out of power
    make sure nothing gets fixed and everybody feels bad about that
    and soon you be back in power

  5. RC says:

    The ugly reality of the high gas prices is out on display with this report. Chalk it on the unintended consequences of QE2. As QE2 started, the chase for commodities started in earnest. Resulted in couple of revolutions half world away. Snowballing from that revolutionary environment a new leg of Oil speculation started which is resulting in consumer sentiment getting crushed here at home.
    But, this too shall pass. Very low number now means that in upcoming reports we are going to see a huge beat.

  6. says:

    “We need a few months of 200k+ job creation to be convinced that a significant improvement is taking place . . .” Kind of a tall order, all things considered (only 18K jobs created) this morning.

  7. kenny powers says:

    Looks like the soft patch is more of a quagmire.

  8. Stuart says:

    So, I guess I wonder what QE3 is going to be called.

  9. Petey Wheatstraw says:

    “So, I guess I wonder what QE3 is going to be called.”

    Either Business as Usual or Standard Operating Procedure.

  10. DebbieSmith says:

    While the American unemployment situation appears to be poor at best, research shows that over the past decade, the unemployment and labour underutlilization situation among young Americans between the ages of 16 and 29 has grown steadily worse. As shown here, labour underutilization among non-White Americans is particularly grim, reaching as high as 43 percent:

  11. Petey Wheatstraw says:

    “NFP: Soft Prejudice of Low Expectations”

    The Hard Prejudice of Blatant Disenfranchisement

  12. franklin411 says:

    Clearly, what is called for is a dramatic budget evisceration and making the Bush tax cut permanent. Nothing creates jobs better than low taxes on the rich and gutting government spending.


    Herbert Hoover

  13. bytehead says:

    I will agree that we do indeed need a few months above 200K to even think that a recovery is even started.

    And the last time that happened was in the ’90s wasn’t it?

  14. NoKidding says:

    “Let’s assume the ADP report is correct: ”


  15. Stuart says:

    Lets re-cap. We’re debating over whether to raise the limit on the country’s credit card from 14+ Trillion to 16 + Trillion, continual spending of $4+ Trillion and tax receipts barely above $2T+ (and those are no longer growing). GDP is on the brink of reversing, these employment figures corroborate this even more. A 2% rise in interest rates adds $5T to the Federal Debt over the next 10 years, offsetting any of the cuts outlined in the various proposals from either the Repubs or Dems. Pretty simple deduction that job #1 is for the Fed to keep rates low, ergo, when the Fed is 85% of the market, does anyone seriously consider it a possibility of the Fed not coming to the table, again? Who is there to replace them given the magnitude of this math.. rhetorical. Perhaps your 401K plans drafted into service.

  16. mathman says:

    This is completely off-topic but very worth-while. It’s a 1/2 hour riveting documentary called Nuclear Ginza 1995 (i was going to wait for the Friday afternoon reads, but may forget by then):

  17. Bill Wilson says:

    Nice call.

  18. jonpublic says:

    We’ve just started to shed jobs at my university, in the top 5 employers for my state. We are going to be bleeding for a couple years at least. Definitely not hiring much.

  19. Jeff Miller says:

    Not that it matters much to the overall argument, but the link shows 157K gain in private employment and 130K in service jobs.

    The discussion about government jobs as part of the issue is important.