The Best Piece of Fiction Since Harry Potter
Posted by Ray on December 4, 2009 under Main | 
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Breakfast with Dave
This morning’s employment report has been heralded as either a rogue number or a turning point, depending if you’re an economist or the President. From my lens, if you believe that report I would love to talk to you about some great time shares and a couple of bridge lease deals I have in New York and San Francisco. I am sure I will have plenty of people disagree with me or call me a Debbie Downer or whatever, but let’s face the facts here, the data does not support a -11,000 print for November. It does not even come close.
On top of all of that we had massive revisions of 159K going back a couple of months. Never in my life have I seen so many smart economists, ADP, the Monster Worldwide Index or the ISM data miss that big before. I guess Obama should have, I am stealing this from Rosenberg, a jobs summit every month. There was no one, or maybe 1 or 2 people, on the planet who would have guessed a -11,000 print for November as the consensus was for a loss of 130,000. The ISM data showed employment contracting, both the manufacturing and the non-manufacturing, ADP, which was a perfect gauge last month, was off by how much? We had 2 weeks of 500K+ prints of initial claims and 2 other weeks with so-so results, but the claims data clearly showed higher losses than what we saw.
The BLS is not even to blame for this as the birth/death model only added 30K of new jobs to the mix. This begs the question, who is hiring? JnJ was cutting a large portion of their work force, the consumer confidence survey showed that jobs were not plentiful, it is taking 28 weeks to find work and no one is questioning this report. I am sorry, as much as I want things to get better we cannot get there through playing games with the numbers. This may simply be a rogue number, who knows, but the likely hood of the consensus being off by 120K is as likely as my dog starting a conversation with me. I am not the only one that feels this way either.
Here is what David Rosenberg said:
“ The U.S. nonfarm payroll report was a huge surprise and a complete disconnect from just about everything we saw regarding the U.S. labour market in November. This is not to suggest that the pace of decline in employment is failing to subside, but rather the magnitude of the improvement in the so called second derivative. There was absolutely nothing in the i) claims data, ii) ISM manufacturing data, iii) ISM non-manufacturing data, iv) ADP report, and v) Challenger hiring and firing data that would have pointed to the direction of such a small decline in nonfarm payrolls (-11,000 in November).”
I fully admit I may be wrong, but when the data points to a completely opposite conclusion it is unlikely. It is no secret that I am no fan of the current administration, or the last one for that matter, as they take great care in making sure they get their way (see GM, Chrysler, Health care reform, etc.) and make sure they pat themselves on the back with every opportunity they can. Unfortunately, the vast majority of the self praise they have given themselves is unwarranted and the result of either things resolving themselves or dumb luck. My point is, I believe they would do whatever it takes to make themselves look like they fixed everything, especially after wasting $1T+, even when we know that is not the case. Keep in mind the BLS has yet to add 800K to the unemployment rolls because they “over estimate job creation” at the beginning of the year.
However, in my opinion, which is whatever you think it is worth, I see the addition of 227K in household number as significant. I see the wage stagnation as significantly important and negative. The increase in the work week is positive, but is that simply because of the uptick in factory orders and will that come back down? The temporary worker increase, +52K, is not a positive like we saw everyone advertising today, here is why. Companies are unsure if the economy is rebounding so why would the hire a full-time employee? They would not, they would hire a temp so they do not have to cover benefits, they can release them without severance, warning and they are significantly cheaper than a full-time employee.
Could the surge in temporary employment mean more hiring could be on the way? Sure, but given that credit is still contracting and retail sales were horrible YoY, remember last year was Armageddon, do you really see the consumer coming roaring back? I don’t. I spent less on Christmas this year, how about you? Why? People are still worried about their jobs, period. Sure employers may be done firing people on a mass scale, but small business are still going bankrupt at a record pace and there is no top line growth. Look at 3Q09 earnings and you tell me that there was real top line sales growth, I will save you the work, there was not unless the company had international sales and even then it was only because of positive FX results QoQ, not YoY.
In my view the current administration has everything to gain from playing with the employment numbers. They are pushing this huge agenda that is not very popular, banks are receiving record bonuses, they spent $1T+ on a stimulus that was a complete and utter waste of money, promised us everything under the sun and are mortgaging our future to pay for it all. So, yeah, they have nothing to lose since they have failed at everything they have done so far. Yes, I know we were losing 700K jobs a month in January, but that was right after Lehman collapsed and it is a year later so give me a break. Even if this number is real what we do not know is who is hiring?
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