Economists React to Payroll Announcment


Friday’s report showing nonfarm payroll growth of 96,000 jobs in September was well shy of most economists’ expectations for more robust gains. Here’s what they’re saying about the data.
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“Looking at the sector details the report shows a very disappointing 18K drop in manufacturing, the first in three months and much worse than is implied by the ISM manufacturing employment index.”
– Ian Shepherdson, High Frequency Economics
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“Accelerating earnings indicate some tightening in the labor markets despite relatively sluggish payroll gains. As earnings continue to rise they will help sustain real consumer spending.”
– Steven A. Wood, Insight Economics
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“We see nothing here to discourage the Fed from raising rates a further 25 basis points on November 10. … Kerry can point to 585,000 payrolls lost during the Bush administration (after factoring in the benchmark revision). Bush can point to 1.69 million jobs created according to the household survey!”
– John Ryding, Bear Stearns
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“Job gains are not a convincing story for the a sustained expansion of the economy. Yet, employment gains are edging higher in a period of high uncertainty regarding oil prices and heavy storm weather for the southeastern portion of the country.”
– Stephen Gallagher, Societe Generale
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“The much ballyhooed announcement of the preliminary estimate of the benchmark revision to be released on February 4, 2005 was anticlimactic. The Labor Department estimates a 236K upward revision … This was at the lower end of most estimates, and is not a large revision by historical standards.”
– Joshua Shapiro, Maria Fiorini Ramirez
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“The biggest surprise in the report was that the BLS failed to provide their own estimate of the impact of the hurricanes on September payrolls.”
– David Greenlaw, Morgan Stanley

[BLR Note: Actually, this is incorrect: "BLS made additional data collection efforts for the hurricane-affected counties. Establishment survey response rates in September were within the normal range for these areas as well as for the U.S. as a whole . . . In the household survey, people who miss work for weather related events are counted as employed whether or not they are paid for the time off. ]
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“Once again, the conflicting evidence from the household and establishment surveys add to the confusion about overall labor market conditions. Indeed, the household survey itself contained apparently conflicting data. … There’s nothing here to alter either the political ‘spin’ about the job market or the course of monetary policy.”
– David Resler, Nomura Securities International
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Economists React
WSJ, October 8, 2004 12:56 p.m.,,SB109724343898240406,00.html

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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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