NFP Day

Jobs_20060504213609
Yes, its that time again: Another non-farm payroll has rolled around.

Consensus is for 205,000 new jobs. As I did last month, I am taking "the Over." The strength of the financial sector, retail, food services and construction are the basis for the call. I continue to note the general quality of jobs, which have been lower paying and offer less  benefits than the jobs they replace. Construction jobs, which were very strong Q1, do offer above average pay. We have also seen a substantial rise in hiring in the financial sector (with strong salaries and benefits). 

Two interesting data points on NFP:

According to today’s NYT, the financial sector accounted for more than one-third of the wages paid in the New York City, yet it provides just one of every seven jobs. That’s an amazing stat. The Times also notes a "surge in hiring on Wall Street is driving the economy of New York City and the surrounding region, but the pace of growth still lags behind the national rate…"

The second tidbit comes our way from Slate’s Moneybox columnist, Dan Gross, who notes that "Payroll company ADP and Marcoeconomic Advisers, the well-respected economic consulting firm, have got together to crunch data from adp’s payroll business and estimate the BLS job creation number. They’re saying 178K for April."  You can read all about this new venture in their press release.

The WSJ’s Justin Lahart looks askance at this new report about the report. While we may enjoy that each month’s NFP report "give investors new opportunities to roll their eyes about monthly economic forecasting," (I plead guilty!) Lahart writes in Job-Watcher Watchers

"One has to wonder about the value of reports that predict what reports might say. Instead of forecasting hard-to-predict wiggles in a monthly jobs report, it would be nice to know what is actually happening more broadly in the economy. Maybe their bosses should cut the economists a break from the guessing game."

He’s referring to the folly of forecasting — and unless you can reliably forecast the numbers, it behooves us to remember that the guessing game (guilty again) is just that — a game, an excercise — and it needs to be taken with a grain of salt.

Understanding what is actually going on in total is much more important to investors than guessing what a model generated report, subject to revisions and recalculations, might say . . .

That said, I’m sticking with the Over.

UPDATE:  May 5, 2006 9:33am

So much for the over: Wow — 138,000 — thats some miss.

The underlying data is mixed:  Average hourly earnings rose at a 3.8% annual rise, the fastest annual gain since August 2001. Unemployment rate was unch. The workweek rose to 33.9 hours (from 33.8 in March), while overtime fell to 4.5 hours (from 4.6
hours in March).

Bloomberg suggested that "the slowdown in hiring suggests record gasoline prices and rising borrowing
costs are forcing companies to rein in costs to maintain profits."

Sources:
Wall Street Hiring Propels Increase in Jobs in the New York Region
PATRICK McGEEHAN
NYT, May 5, 2006
http://www.nytimes.com/2006/05/05/nyregion/05jobs.html

Job-Watcher Watchers
JUSTIN LAHART
May 5, 2006; Page C1
http://online.wsj.com/article/SB114678916795344434.html

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