NFPayroll Day

A couple of things to keep an eye on when the NFP numbers come out at 8:30am this morning:

1) Consensus is 115,000 for new jobs in December; 

2) ADP and job postings pointed to an actual contraction in jobs last month. That’s something we haven’t seen since mid 2003 (see chart below)
Note: I used to mock the ADP data as being so awful, but since the big BLS revision, ADP turned out to be more accurate than originally appeared. While the jury is still out, I am trying to remain open-minded about their analysis;

3) Look for job losses in Manufacturing and quite possibly Construction. The shrinking manufacturing base is a trend that has been in place for decades, but the slowing Construction hiring is more recent. The question is whether the strength in commercial building will offset weakness in residential. Given the unusually warm weather in December, construction crews might have kept on working. ( (Retail job losses will likely be seasonal).

4) The Key to the number will be how the market interprets that the Fed will view it:

• An (unlikely) upside surprise will be the last nail in the coffin for any immediate rate cut hopes;

• A weak number reignites expectations for a Fed cut sooner than later, eventually leading someone to pen a piece titled "The Greenspan Put Lives!";

• A consensus number would be the real surprise.

5) Actual Job losses — a contraction — hasn’t happened for quite some time:

Total NFP Employment, with  Month-to-Month % change (annual rates)
click for larger chart

Total NFP Employment, with Year-over-Year % change
click for larger chart


6) As the chart below shows, this remains the weakest job creation recovery in the post WWII era. And if this turns out to be the peak of the cycle, it increases the likelihood of a recession over the next 12-24 months. I remain in the camp that a recession is an increasing possibility, but not a sure thing.   

Employment Post Recession


Chart Courtesy Spencer England Equity Review (SEER)


Payroll Number Is Going to End Guessing Game
January 5, 2007; Page C1


NFP: Total Employment Period-to-period percentage change at annual rates

NFP: Total Employment  Percentage change from same period last year


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