Employment Situation, June 2017

The Bureau of Labor Statistics released its Employment Situation report for June this morning at 8:30 edt.  The report was a strong one, indicating that the economy added +222,000 new jobs during the month.

Revisions to the so-so reports of the prior two months (made as fuller information comes in to government statisticians from participating employers) were also strong, adding a total of +47,000 positions to the previously estimated gains of +174,000 new jobs for April and +138,000 for May.

The ES is having a positive impact on stock trading in New York today, partly because the numbers are good.  It’s also partly–maybe mostly–because the monthly employment report released by ADT a couple of days in advance of the ES, and which is designed to mimic the ES, reported +158,000 job additions, which was the weakest in that series for a considerable time.

If anything, the June ES gives more encouragement to the Fed to begin in the next month or two its unwinding of unconventional measures to keep long-term interest rates low.

More on this Monday.

 

the November 2012 Employment Situation Report

the report

As usual, at 8:30am Eastern time, the Bureau of Labor Statistics of the Labor Department issued its monthly Employment Situation report.  Economists had been expecting a gain of around +80,000 new jobs, arguing that the negative effects of Hurricane Sandy would depress job creation in the Northeast.  The actual figure came in at +146,000, consisting of +147,000 additions in the private sector and a loss of -1,000 jobs by state and local governments.

As I’m writing this, S&P futures have swung from a loss of about 2 points to a gain of 4.

the revisions

If you recall, last month’s ES was somewhat controversial.  Total job gains for October were reported as a whopping +171,000 (+184,000 private, -13,000 government).  September figures were revised up by +28,000, as well.  Some Republicans claimed that the Labor Department was succumbing to administration pressure to inflate the figures in order to influence the election.  I can imagine politicians from either party contemplating trying to influence the figures, but I can’t imagine that any attempt could be kept secret for more than a nanosecond.

In any event, the initially reported October figures were revised down, to +138,000.  The private sector hires were revised up, however, to +189,000 new jobs.  The entire revision came from reported government layoffs of -51,000.  Hmm.

September figures were also revised down from +148,000 (+128,000, +20,000) to +132,000 (+122,000, +10,000).

For September + October revisions totalled -49,000 (-1,000, -48,000).

State and regional jobs numbers come out on December 21st.  They might be worth taking a look at.

my take

The November job additions are good news.

I’m not sure where the +80,000 consensus estimate came from.  In each of the past several months the economy has been adding about +150,000 new jobs.  The areas worst affected by Sandy, the Northeast, represent a little more than 10% of the population of the US.  If you argue the effect of the hurricane was to completely eliminate job creation in the Northeast, and gross up the estimate by 10%, the result is +88,000 jobs.  That would be not much more than half the recent job growth trend.  Adding another, say, +8,000 to account for storm-related job disruption elsewhere doesn’t change the picture much at all.  So it seems to me there’s something wrong with the estimates–not that I’ve taken the time to peruse any of the particulars.

The Labor Department says that “Hurricane Sandy did not substantively impact” the November figures.  If my back of the envelope calculation in the paragraph above is even remotely near the mark, the storm shouldn’t have.  Maybe ex Sandy the job additions would have been +10,000-+15,000 higher.

The biggest gains for the month came in retail, with +52,600.  The ES figures are seasonally adjusted, so this means holiday hiring is pretty robust this year.  Construction (-20,000) and Manufacturing (-7,000) lost jobs.  These numbers fit pretty well with the sense I’m getting from company reporting that consumers are oblivious to the impending fiscal cliff, while businesses are much more cautious.

All in all, I think the current ES is as encouraging as bulls could hope for.

February 2011 Employment Situation: a jobs number Wall Street can at least like

the Employment Situation

The Bureau of Labor Statistics released its February 2011 Employment Situation report on Friday.

It’s not a great report but it’s a good one, one that reinforces the consensus view on Wall Street that the overall economy in the US continues to heal.  The initial move of investors in the New York market on the Friday open–just after the BLS announcement–was to sell.  But the downdraft was mild.  And it arguably was more a function of how strong the market has been over the past few days than any negative reaction to the jobs report itself.  Yes, the market closed down.  But, again, I think this had little to do with the job numbers.  More on the market when I update Current Market Tactics tomorrow.

headlines

The headline numbers were:

–the economy added 192,000 jobs in February.  That’s well above the 100,000 positions the US needs to create to absorb new entrants into the workforce, and it’s within shouting distance of the 200,000+ that would indicate a healthy recovery.

–the unemployment rate fell below 9%, to 8.9%.  There are legitimate questions about how comparable this figure is to results in prior recoveries.   But it is at least psychologically important to get rid of the nine to the left of the decimal point.  Also, the year-ago unemployment rate, where comparability issues aren’t so much at issue, was 9.7%.

revisions:  more good news

There’s more positive news in the report than just the headlines:

The December job additions figure has undergone its second monthly revision.  The initial number reported was +103,000 jobs.  The January revision added 18,000.  The February revision chipped in another 31,000, bringing the final December number to +152,000 jobs.  That breaks out into +167,000 jobs in the private sector, -15,000 in government.  Thelatter secots is likely t ocontinue to be weak, as state and local governments try to bring chaotic finances under control.

The January job additions figure, which was initially penciled in at a disappointing +36,000, has been revised up by +27,000.  According to the BLS, the private sector added +68,000 positions, government declined by -5,000 workers.  One more revision will be made, next month.

investment implications

It certainly is comforting to see the January jobs number revised up. And it’s good to see the February figure as high as it is.  At the same time, though, the Employment Situation report is only confirming what consumer spending figures, consumer confidence numbers and private surveys by service providers to employers have been telling us for some time.

I think we’ve passed the point in the economic cycle where this BLS report will be crucial to investors.  I suspect that if in coming months a jobs figure is either surprisingly good or unusually bad, the market will ignore it as readily as it did the sub-par January result.  From now on, I think the market will be pleased at continuing good figures from the Employment Situation, but will react with a yawn.  It will only react in two cases–and badly in both:  if the numbers are very weak for two or three months in a row, or in the (unlikely for a while, in my view) event they’re so strong they suggest the Fed will act to normalize its extremely stimulative interest rate policy. 

January 2011 Employment Situation report: a poor number no one believes

The Employment Situation for January

The Bureau of Labor Statistics (BLS) released its January Employment Situation News report last Friday.  The headline figure, the number of new jobs added in the economy, was a disappointing +36,000.

not a great report

Why disappointing?  Two reasons, one economic and one social/political:

–The January figure follows much better results of +93,000 in November and +121,000 in December.  It would have been more comforting had January showed further progress toward macroeconomists’ hoped-for 200,000+ monthly job additions.

–On average, 100,000 people a month finish school or professional training and enter the workforce each month.  So, although it’s good that the economy created 36,000 new positions last month, the number implies the country also produced another 64,000 would-be workers who can’t find jobs.  This adds to the social pressure caused by the fact that about 14 million other Americans are already in the same situation.

the unemployment rate dropped

…to 9% from 9.4%.  That’s because, based on its monthly phone surveys, the BLS estimates the bad weather that swept over much of the country kept just under a million people from getting out to look for work.  Interestingly, the weather was not bad enough to keep people away from the malls last month.  Contrary to cautious analysts’ projections, retail sales for January were up by a surprisingly good +.7%.

the jobs number may not be as bad as it looks

First of all, there’s the weather factor.  The January figures showed big negative swings in transportation and warehousing workers (-86,600 month on month) and in temporary workers (-49,500) that may have been storm-induced.  On the other hand, the manufacturing sector was unusually strong, gaining 49,000 workers, 62,000 of them in durable goods (an area that’s especially weak during recessions and strong in recoveries).

Also, the BLS has just carried out a periodic overhaul of the analytic framework it uses to generate the employment data.  Teething pains, anyone?

In addition, if the recent past is any guide, the 36,000 figure is going to be revised up.  Each monthly figure is redone twice–as new data come in during the following month and the month after that. Recently, all the revisions have been in the plus column.  For example:

–The final November jobs figure is +93,000.  It was initially reported as +39,000  and was revised up to +71,000 in December.

–The December figure was initially reported as +103,000.  It has just been revised up to +121,000.

Wall Street isn’t worried (so far)

Investors remain bullish in the face of the weak job numbers, for several reasons:

–asset allocation shifts.  Some domestic retail investors are starting to reverse their ultra-cautious over-allocation to fixed income and beginning to buy US stocks for the first time in a couple of years.  Others, professionals included here too, having already made a lot of money in emerging markets, are taking profits there and rebuilding their US holdings.

–the expectation of favorable revisions in the jobs data, given other indicators that the US economy is building positive momentum.

–earnings results from publicly traded companies.  These are coming in very strongly, and leading indicators are signalling that more good news is in store.

–the number of people unemployed vs. the number employed.  Although there are still around 14 million people unemployed in the US, or twice the “normal” number, there are over 800,000 more people employed today than a year ago.  In a bull market, and when trying to figure out whether firms will have year over year earnings gains, the latter figure is probably more important to Wall Street.

investment implications

Asset allocation shifts, or what’s sometimes called “the weight of money,” is a transitory phenomenon.  At some point, investors become satisfied with their new portfolio structure and stop making changes.  Then, this influence–at present, favorable for stocks–disappears. So it’s not something to bet the farm on.  Nevertheless, while investors are looking for stocks to buy rather than things to sell, dips in the stocks of underachieving companies may be milder, and the positive response to good news may be more enthusiastic, than one would normally expect.  To me, this means potential trading opportunities over the next couple of months for anyone who already has a reasonably constructed portfolio.

One thing to keep an eye on:

Everyone, me included, is assuming that the BLS figures are simply wrong, that the actual job situation is better than the numbers suggest.  We’re all thinking that when the weather gets better and the BLS shakes out some of the kinks in its system the numbers will end up being in the +150,000-200,000 range.  If they’re not, that realization will likely usher in a period of stormy stock market weather.  Because it would also take away some of the sense of urgency that asset re-allocators are currently feeling, we might have an ugly month or two.

May 2010 US employment situation

the report

Last Friday, the Bureau of Labor Statistics released its Employment Situation Summary for May.

Wall Street reacted very badly to the release, falling by almost 3% on the news.  What was so bad?

background

The civilian labor force is about 154.4 million, and normally grows by about 100,000 a month.  The latter is mostly a fact about population growth, but there’s a cyclical element as well.  During recessions people looking unsuccessfully for work may become discouraged and stop trying, thereby dropping out of the labor force.  When times get better, these people tend to rejoin the work force.

Of the labor force, about 139.4 million are currently employed.

September 2007 was the most recent peak in employment, at 146.2 million employed.  The work force at that time was 153.4 million.  Between then and now, the labor force has increased by about 1.0 million and there are about 6.8 million fewer people employed.

The recent low point for people employed was October 2009, when only 138.2 million people were working.  In the intervening seven months, the economy has regained around 1.2 million jobs, although about half are temporary, working for the federal government on the latest census.

In recent months, employment gains had been accelerating.  Ex the census work, the economy gained 158,00 jobs in March and 218,000 in April.  Economists had been issuing reports predicting increases of 150,000 and up for May.  Whisper numbers were higher.

the May figures

The economy did gain 431,000 jobs in May and the unemployment rate fell.  But 411,000 people were hired to work on the census.   The US added only 41,000 private-sector jobs.

As government spokespeople tried to point out (lamely, in my opinion), this is an increase.  It’s only one month of data.  And it’s better than nothing.  The other side of the coin is that the number falls below the average rate of growth of the work force, and it breaks the string of month-to-month gains in employment.  So if you were hoping that the past three years were all a collective bad dream that would quickly go away as we were waking up–if no one else, apparently Wall Street traders were–this report is a major disappointment.

where the shortfalls lie

We can’t (or at least I can’t) see the detailed spreadsheets economists used in formulating their idea that May would be another month of large job gains–assuming they actually had them and didn’t just extrapolate from the trend of January-April.  But we can look at how the actual numbers for May differ from those from earlier in the year.  April was an unusually good month, with a leap of 73,000 month-to-month in the catchall service category professional and business services, so the comparison below is vs. March.

We’re looking for a negative change in hiring of about private-sector 120,000 jobs.  The biggest contributors are:

construction    -62,000 jobs, to a loss of 35,000

retail     -29,300 jobs, to a loss of 6,600

health care and social services     -26,100 jobs, to a gain of 13,100

leisure and hospitality     -21,000 jobs, to a gain of 2,000.

Together, they total negative change in hiring of almost 140,000 jobs.

On the plus side, business and professional services was up by 21,000 jobs and manufacturing gained 10,000.

Generally, though, the positive changes vs. March seem to  come from industrial areas, the negative ones from areas serving the consumer.

where to from here?

The Fed has consistently been saying that the US faces a long, slow slog on its way back to economic health–one that will require continuing assistance from easy monetary conditions.  Unlike the March and April employment data, the May results are more in line with this point of view.  They are the first hints that Wall Street’s apparent optimism over near-term recovery prospects may be too optimistic.  But we need more information to make an informed judgment.

As far as the stock market is concerned, we may see more emotional reaction to the May report from Wall Street in the next few days.  Monday will be particularly interesting, since investors will have had the weekend to do more thinking about what’s going on.

I’m not sure there’s anything but a very near-term worry about the overall level of stock prices.  Equities appear cheap to me, both in an absolute sense and relative to fixed income.  But I think this is the main fear the May employment report raises.  The May data seem to reinforce what has already been a successful stock and industry selection strategy:  prefer exposure to IT and other manufacturing rather than to the consumer, and look for companies with exposure to high growth economies in the Pacific and in other emerging market areas rather than to the US.

the numbers