Bracing for NFP Day

Once more unto the breach, dear friends, once more:

The monthly NonFarm Payroll report rolls out today, and the consensus is none too cheerful: Median estimates of 82 economists surveyed by Bloomberg for April 2008 is for a job loss of -75,000 (Dow Jones had -85,000). Estimates ranged from -150,000 to -18,000. None of the economists surveyed had a positive estimate.

Imagine that: +5,000 is a huge upside surprise.

Let’s review the data points leading to NFP, starting with the positive arguments:

• According to Greg Mankiw there is no recession. Brian Wesbury agrees.

James Pethokoukis went even further:  “Out: Recession. In: Expansion.”

• Today’s WSJ notes: “In the past 10 business cycles, year-over-year growth in payrolls has averaged 3% in the 12 months leading up to a recession. Twelve months before payrolls peaked this time around, job growth averaged just 1.5%. That could mean there’s not a lot of payroll fat to be trimmed in this downturn. It could explain why weekly claims for unemployment benefits still haven’t climbed to 400,000, the level associated with recessions.” 

• ADP employment report shows addition of 10,000 jobs in April.

Hey, that’s not too awful sounding — why are the economists so negative? Let’s consider a few reasons:

• ADP forecast a gain of 10,000 this month. How is that a negative? ADP has significantly understated job losses over the past 5 months. Their overestimates of private payrolls averaged +117,000.  So if ADP remains consistent, a triple digit loss is a distinct possibility.

• Jobless claims data were 380,000 (April 26th  week) — these are levels consistent with large payroll losses. Also, continuing claims backlog surged 74,000 to new highs (3.019 million). I expect we will see 5.5% unemployment rate by Labor Day.

• BLS has been adding Business Birth/Death estimate jobs at a rate equal to or greater than 2007 rates — a worrisome sign. 

• Recent sentiment surveys — University of Michigan sentiment index surrounding the job market  outlook was at the worst level since January 1991. The Conference Board perceptions over the labor market deteriorated markedly in April; their ‘jobs-are-plentiful’ index printed its lowest level in nearly three years.

Challenger layoffs were 90,015 in April — a 68% increase from March, and up 27% Year over year, to a 19 month high.

Manpower hiring index sank in 2Q to 14 from 17 in the first quarter and 18 a year ago.  This was the softest result in four years. Merrill Lynch’s David Rosenberg points out that “a 14-ish number in the past has often coincided with recession and deepening job losses – 2001Q3, 1990Q3, 1981Q1 just to name a few.”


Bottom line:  A positive number would be a huge surprise; a 6 figure loss is a small but distinct possibility . . .



Job Cuts May Not Get Too Deep
WSJ, May 2, 2008

The ADP National Employment Report
April, 2008

Manpower Employment Outlook Survey
Q2 2008, United States

Category: Data Analysis, Economy, Employment, Wages & Income

Snow, Bies, Poole, Mobius, Faber Discuss U.S. Economy

Category: Credit, Economy, Federal Reserve, Inflation

Barron’s Panic Euphoria Model

Category: Markets, Psychology

Inflation Index Bonds Now Paying 0%

Category: Fixed Income/Interest Rates, Inflation

BMO’s Don Coxe on Food Prices and Shortages

BMO Financial Group global portfolio strategist Don Coxe discusses Food prices, shortages, and the appropriate investment strategy in the face of the recent food crisis:

click for video

courtesy of BNN

Market Morning
Global Portfolio Strategy [04-30-08 10:10 AM]
BNN, April 30, 2008

Category: Commodities, Inflation, Television, Video

AAii Sentiment Data

Category: Psychology

‘Like Watching Dinosaurs Mate’

As we await what is happening with Microsoft and Yahoo, Aaron Task and I discussed the bigger picture as to what happens next on the internet.

This was all pretty off the cuff stuff (in case you cannot tell) but its how I really feel about the players involved:

That headline was actually spontaneous (I can turn a phrase, huh?)

Ok, feel free to write what a MSFT basher I am (no arguments from me)

Category: Digital Media, Video, Web/Tech, Weblogs

GDP Charts

Category: Data Analysis, Economy

McCain & Clinton Fail Economics 101

Category: Commodities, Energy, Politics

Becker, Phelps, Scholes & Spence on Decoupling

Nobel laureates in economics Gary Becker of the University of Chicago, Edmund Phelps of Columbia University, Myron Scholes of Stanford University, and Michael Spence, former dean of the Stanford University Business School, participate in a panel discussion at the Milken Institute Global Conference in Los Angeles about the theory of "decoupling" and outlook for the U.S. and global economies.


click for video


Becker, Phelps Are Optimistic on U.S. Economic Outlook
Bloomberg, April 29 2008

Category: Economy, Video