"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Friday, November 4, 2011

Employment Situation

There's really only one market indicator coming out today, but it's a big one: the Employment Situation report.  this report is the official word on how many nonfarm jobs (and how many nonfarm private sector jobs) were created for the previous month, what the unemployment rate is, how much average hourly earnings changed, and what the average work week is.  A good Employment Situation report creates joy and thanksgiving in the market place, because it points to a healthy economy.  A bad Employment Situation report?  Not so happy.
In September we saw 103,000 total new nonfarm payrolls (with 137,000 new private sector jobs, which does imply a loss of 34,000 public sector jobs).  The unemployment rate was 9.1%, average hourly earnings increased 0.2%, and the average workweek was 34.3 hours.
The Econoday-surveyed analysts aren't feeling like things will change much in October.  They're calling for a decline in the rate of job creation, with 90,000 total new nonfarm jobs (and 120,000 new private sector jobs), and no other changes.
And to find out how we actually did, we turn to the Bureau of Labor Statistics' Employment Situation Summary.  To start with, nonfarm payroll employment increased 80,000 in October and private sector employment increased by 104,000 (missing expectations in both cases).  The unemployment rate fell to 9.0%, average hourly earnings increased 0.2%, and the average work week remained steady at 34.3 hours..
Now, let's return to that 9.0% unemployment rate for a second.  That indicates 13.9 million people unemployed.  But the BLS has a very specific definition of "unemployment", meaning "people not working, but who have looked for work in the past 4 weeks".  It doesn't include people who are "employed part time for economic reasons" (8.9 million people) or "persons marginally attached to the labor force" (2.6 million people).  That first category is people who want permanent full-time employment, but are working part-time jobs because they can't find full-time work.  The second category is people who are not working, want employment, and have looked for work in the last twelve months.

Thursday, November 3, 2011

First Time Jobless Claims

First up for today's economic data is First Time Jobless Claims.  This particular report is a look at, well, exactly what it sounds like.  How many people filed for unemployment insurance for the first time in a given week.  The figures come in two flavors:  seasonally adjusted (which attempts to make allowances for seasonality[1]) and unadjusted (the actual raw number of claimants).  Also, bear in mind that on the release date we get an advance figure - essentially a preliminary estimate that is adjusted to a final result on the following week[2].  The report also provides a total number of people receiving unemployment insurance in all programs for a given week (although that figure is on a two week delay).
Last week, we saw a total of 402,000 new (seasonally adjusted) claims for the week ending 10/29.  This week, the Econoday-surveyed analysts are feeling just very mildly optimistic, and are expecting first time claims to fall to only 400,000 new claimants.
For the actual data, we turn to the US Department of labor, and the (recently renamed) Unemployment Insurance Weekly Claims Report.  As anticipated, we see that the seasonally adjusted initial claims for the week ending 10/22 have been revised upwards to 406,000.  Meanwhile, the advance figure for seasonally adjusted  initial claims for the week ending 10/29 came in at 397,000 - beating expectations (although it remains to be seen whether expectations will still be beaten when they get revised on the 10th).
The advance figure for actual initial claims came in at 366,923, a decline of 10,433 from 10/22, while the total number of people claiming benefits in all programs for the week ending 10/15 came in at 6,781,690 (an increase of 103,117 from the previous week).
So we beat expectations, and beat it on a fairly important and market-moving economic measure.  Combine this with the euphoria in the markets about the possibility that the Greek government will collapse and/or the possibility that Greece will be thrown out of the EU, and we may be looking at a good day in the markets.
[1]  Barron's Dictionary of Finance and Investment Terms, Seventh Edition, defines "seasonality" as:  variations in business or economic activity that recur with regularity as the result of changes in climate, holidays, and vacations.  The retail toy business, with its steep sales buildup between Thanksgiving and Christmas and pronounced dropoff thereafter, is an example of seasonality in a dramatic form, though nearly all businesses have some degree of seasonal variation.  It is often necessary to make allowances for seasonality when interpreting or projecting financial or economic data[3], a process economists call seasonal adjustment.
[2]  The sheer weight of history over the past few years indicates that it will be adjusted upwards, calling into question why everyone gets excited about the advance figures in the first place...
[3]  No, I don't know what's wrong with looking at the actual numbers either.

Wednesday, November 2, 2011

ADP Employment Report

The ADP Employment Report is the second wave of jobs week, and is rather less depressing to look at than the Challenger Job Cuts Report.  Why?  Well, this report looks at the total number of new jobs that were created in the private sector.
ADP, or Automatic Data Processing, is "one of the world's largest providers of business outsourcing solutions" (to quote their website).  In essence,if you are a business you can hire them to handle your human resource and payroll needs.  Since they have "approximately 570,000 clients", this puts their fingers on the pulse of private sector employment.  They then take that information and use it to project how the overall employment situation will look for a given month.
Last month, ADP reported 91,000 new private sector jobs were created in September.  This month, the Econoday-surveyed analysts are feeling even more optimistic, and are expecting a consensus average of 100,000 new jobs for October (although the spread is 38,000 to 139,000 new jobs).  Are they right?
According to the October 2011 ADP National Employment Report the analysts were, if anything, not optimistic enough.  September jobs were revised upwards to 116,000, and October saw US nonfarm private business employment increase by 110,000.  So yeah, beating expectations by 10% is nice.  Most of the gains came from the service-providing sector with an increase of 114,000, which helped offset declines in the goods-producing sector (down 4000) and the manufacturing sector (down 8000).  Small business employment increased 58,000, medium business employment rose 53,000, and large business employment fell 1000.