Weak Jobs Number Dissappoints

A dissapointing number this morning: Only 96,000 new jobs were added to company payrolls in September — that’s far fewer than the 145,000 consensus economists forecast.

Some curious data under the headlines in this morning’s Employment Situation report. The Establishment survey gains of 96,000 were below consensus, and well below what the 150,000 per month needed just to keep pace with population growth. Also of note: of these 96,000 jobs, only 59,000 were private sector (37k were govt.) I need to drill further into the Birth/Death adjustment (business creation/destruction) but at first glance it appears that out of those 59,000 private sector positions, ~30,000 were due the birth/death adjustment.

The Household survey shows a drop of 201,000 jobs (Hey! Where are all the Household Survey cheerleaders this month?!?); Note also that 485,000 people left the labor force — a surprsingly high number. Lastly, the BLS made specific mention of an unusal phenomenon in their release — the increase in “multiple job holders.”

Here’s a quick excerpt:

Many economists had expected the hurricanes that pummeled Florida and other areas of the Southeast to be a factor in the report, but Kathleen Utgoff, commissioner of the Bureau of Labor Statistics, said the ability to gauge the hurricanes’ effect on the jobs numbers is limited. “Overall, we do not believe that the net result of these factors materially changes the national employment situation for September, but we cannot precisely quantify the weather effect,” she said.

Friday’s report also included revised data for the period from March 2003 through March 2004. Payroll employment for that time was raised by about 236,000 jobs, according to a preliminary estimate. That number was also weaker than many forecasters had expected. President Bush’s Council of Economic Advisers had estimated that the payroll-employment figure for that period could be revised upward by 288,000 jobs, and conceivably by as much as 384,000.

BLS September Jobs Release (October 8, 2004)
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Last Pre-Election Jobs Report Shows Modest Payroll Growth
Firms Added 96,000 Jobs in September;
Revision Finds Stronger Hiring in 2003
October 8, 2004 10:17 a.m.


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Presidential Futures Markets: Spurious Predictive Powers

Last Thursday’s presidential debates surprised many of the 63 million Americans who tuned in by offering substantive policy discussions. The candidates were relatively light on rhetoric and theatrics. That represents an improvement over the style-heavy focus so common most election years. What was also interesting is how the outcome of the debates diverged from the political futures exchanges, which have become the darlings of the economic and political punditocracy.

These exchanges have a host of inherent weaknesses:. They have a very small number of active participants; The dollar amount wagered is tiny; and, and upon closer inspection, these markets have what can only be called a mixed track record. That should be of little surprise to students of the capital markets, as the liquid, cash-rich exchanges offer no better utility in predicting the future. Investors who make financial decisions based on what these “prediction markets” suggest are engaging in risky financial behavior – despite the fact they have become de rigeur among the talking heads.

Prediction Mechanisms

What are the reasons for relying on markets as predictors of the future? I consider the following concepts as key to the belief that futures markets can be used as predictors:

· Price contains all the information one needs.
· Human beings are rational economic players.
· Information distribution is highly efficient.
· Market participants capitalize on that information.
· Markets are free from manipulation.

It should be apparent to most market observers that each of the above items is, at best, only partially true: Investors are hardly unemotional; The markets may be efficient – eventually – but often contain pockets of false or poorly disseminated information; and. And, while it may be difficult to manipulate the giant U.S. equities markets, the diminutive futures exchanges are much more easily influenced.

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