Why do we care so much about the monthly NFP data?
1) NFP reveals how strong economic growth is; That’s why we want to know whether we are creating jobs above population growth trend — i.e., 150k/month;
2) It provides a window into inflation, looking at the question – "Is there wage pressure?"
3) Job creation gives us an early read into how much consumer spending we can expect in the next few quarters;
The September post-Katrina data will not answer any of these questions. That’s why unless we get a very strong or very weak number (ex-Katrina), you can pretty much toss out it out and wait until next month. For you golfers out there, consider this NFP a Mulligan.
We know Initial Jobless Claims have jumped considerably in the 4 weeks since Katrina — from just over 300k to just under 400k since Katrina hit. Some estimates are that New Orleans alone lost nearly 400,000 jobs.
The wage pressure data — personal income gains — will be unaffected by the natural disaster. It may therefore may carry more weight than typical, especially given that Wall Street has recently discovered inflation.
I have been taking the "Under" for what seems like forever. This month’s consensus expectation of a loss of 175k is really a blind guess. Start with all the jobs lost in New Orleans, add back 150k average monthly new jobs, round up an extra 25k. That gives me an estimated job loss of 225k jobs.
I’m sticking with the "Under," but this month will be little more than a guess on the part of BLS.
Chart courtesy of WSJ