NFP - Friday analysis
-11k with revisions of +159k and the unemployment rate improving to 10.0%
Obviously fewer job losses is good for the economy but an improvement in both figures creates as many questions as it tries to answer.
First on the -11k. This is from the "Establishment" survey, or the NFP figure. When trying to forecast it I continue to say that using the initial jobless claims is the most effective way to get a handle on this figure. For the record, after including yesterday's jobless claims figures my forecast would have been for -52k. Just a reminder that the NFP survey is taken during the week of the 12th, normally the 3rd week of the month. In November that meant that jobless claims improved from 501k to 462k so a good figure today should have been expected.
|
Second, on the 10% unemployment rate. Or should I say, on the 10% unemployment rate????
How did this figure improve? Well we're analyzing a survey and as stated previously, it was likely taken days before Thanksgiving. The real question that I have on this survey is: Are those on Extended benefits being counted? If you apply for extended benefits do you also qualify as a discouraged worker? Hopefully that answer is No. Yesterday we saw that 597,688 people signed up for extended benefits. This is approximately 50k more than a month ago and 597k more than this time last year. Yet the unemployment rate improved?
|
The Household survey shows a 3% y/y increase in people that are no longer in the workforce. It also increased by 0.5% m/m which to me smells more like 10.5% or 13% unemployment. Either way its a survey and we've discussed before how surveys are inferior to actual data so we won't harp on the discrepancies any further. We look forward to the Treasury report that comes out on the 10th which will show how actual tax receipts are flowing. This will tell us if there has been an increase or continued decrease (-22% y/y so far) in personal taxes. Fewer tax receipts points to less income flowing into households meaning less consumption.
|
The important thing is what it means to the Fed and policy will be left at ultra-low levels for some time to come.
|
We initially thought that the current recession was similar to that of 2001/02. In a way it is as jobs are following a similar path. The job losses in the prior recession were mostly in Tech. Today they are finance related (to keep it short). See the chart below:
|
But we can do so much better than that. As we've discussed a few times the stock market may be replicating the gyrations from the '70s. How about the gyration in job creation? It looks absolutely similar to today's economy.
|
Why is it similar? Energy crisis, rising inflation, such as health-care costs, poor monetary policy and regulatory decisions.... We could go on and on as we all know. But the charts are so similar and the expectations going forward seem to replicate that of the mid '70s as well. Slow growth, modest job creation, a general gearing down of expectations...
|
The good news is that all the above sets us up for a trading environment for the next 5 to 10 years. We are far from a buy-and-hold environment, the current environment will need intelligent decision making to stay ahead of the curve.
Speaking of which, Monday look for a few charts on divergences, such as the volume to price divergence in stocks.
|
|
