Suitably Flip

Jobs Report Pick'em

As discussed on Wednesday, economists are expecting 125,000 (or maybe as many as 150,000, depending on which consensus you look at) new payrolls in January, down from 200,000 in the previous month, with the headline unemployment holding at 8.5%.

The ADP report showed a larger deceleration in growth of 117,000 (even from the downward revised December growth number), but as we know, ADP has a spottily predictive record.

I'm going to guess the payroll growth will not disappoint (at least not by much), maybe around the 130,000 level.  But expect to see some, possibly a large, downward revision for December - let's say to 170,000.

With these numbers failing to climb, even fleetingly, meaningfully above the breakeven level, I don't think the recent downtrend in the headline unemployment rate can be sustained, even if we continue to see folks fleeing the labor force.  If anything, the recent glimmers of positivity in the economic data may portend a bit of a rebound in the labor participation rate, which could yield a multiple-tenth uptick in the headline rate.

So let's hang our hat on 8.7% unemployment, 130,000 non-farm payroll growth (145,000 private), and a downward revision to December from 200,000 to 170,000.

Numbers coming at 8:30 am.

Update:  Wow.  Up 243,000 (private: 257,000).  Unemployment rate down to 8.3%.  December revised to 203,000.

The only thing I was right about: the headline payroll number didn't disappoint.

These are very decent numbers, at least relative to the last couple years.  It'd still take years at this level to return us to pre-recession employment, but this is a rare move in the right direction.

Update:  A rather large caveat: there are significant revisions to the seasonal and population adjustment factors in the January report.  So while the adjusted headline participation rate held steady at 63.7%, that obscures a record jump of 1.2 million (the largest percentage jump in 30 years) in the number of eligible workers not participating (i.e. not actively seeking employment).  And this month's 63.7% is actually slightly lower than last month's 63.7%, meaning the labor participation rate has notched a fresh 30-year low.

The historically unprecedented jump in towel-throwing-in by would-be job seekers suggests the contorted seasonal and population adjustments that yielded the declining unemployment rate and the strongish monthly payroll growth may be illusory.

Unadjusted, January payrolls fell by 2.7 million, so the adjustments represent nearly 110% of the raw change.  If those tweaks are overreaching by even 10%, we would've seen a net decline in adjusted payrolls, not an increase.

Your scary chart of the day is this one from ZeroHedge.

Comments

Jobs Report Pick'em

As discussed on Wednesday, economists are expecting 125,000 (or maybe as many as 150,000, depending on which consensus you look at) new payrolls in January, down from 200,000 in the previous month, with the headline unemployment holding at 8.5%.

The ADP report showed a larger deceleration in growth of 117,000 (even from the downward revised December growth number), but as we know, ADP has a spottily predictive record.

I'm going to guess the payroll growth will not disappoint (at least not by much), maybe around the 130,000 level.  But expect to see some, possibly a large, downward revision for December - let's say to 170,000.

With these numbers failing to climb, even fleetingly, meaningfully above the breakeven level, I don't think the recent downtrend in the headline unemployment rate can be sustained, even if we continue to see folks fleeing the labor force.  If anything, the recent glimmers of positivity in the economic data may portend a bit of a rebound in the labor participation rate, which could yield a multiple-tenth uptick in the headline rate.

So let's hang our hat on 8.7% unemployment, 130,000 non-farm payroll growth (145,000 private), and a downward revision to December from 200,000 to 170,000.

Numbers coming at 8:30 am.

Update:  Wow.  Up 243,000 (private: 257,000).  Unemployment rate down to 8.3%.  December revised to 203,000.

The only thing I was right about: the headline payroll number didn't disappoint.

These are very decent numbers, at least relative to the last couple years.  It'd still take years at this level to return us to pre-recession employment, but this is a rare move in the right direction.

Update:  A rather large caveat: there are significant revisions to the seasonal and population adjustment factors in the January report.  So while the adjusted headline participation rate held steady at 63.7%, that obscures a record jump of 1.2 million (the largest percentage jump in 30 years) in the number of eligible workers not participating (i.e. not actively seeking employment).  And this month's 63.7% is actually slightly lower than last month's 63.7%, meaning the labor participation rate has notched a fresh 30-year low.

The historically unprecedented jump in towel-throwing-in by would-be job seekers suggests the contorted seasonal and population adjustments that yielded the declining unemployment rate and the strongish monthly payroll growth may be illusory.

Unadjusted, January payrolls fell by 2.7 million, so the adjustments represent nearly 110% of the raw change.  If those tweaks are overreaching by even 10%, we would've seen a net decline in adjusted payrolls, not an increase.

Your scary chart of the day is this one from ZeroHedge.