Friday, March 5, 2010

Nonfarm Payroll

Since the market is a bit moribund this morning, I thought I'd post something I wrote to a trader's group I belong to after the last NFP report. I've found that most people don't understand this report and certainly don't read the thing. It's 42 pages long, after all, and most people have a life. I must not have a life because I do read it. The reason I do is that it's in the details that one can start to ferret out what the true picture is. This is part of what I posted to the trader's group on last month's numbers:

Changes in the establishment data (Summary Table B) are where a wealth of information is found. The reason this is so interesting is that this data is not self-reported but is calculated from payroll records so it gives a clue as to whether new jobs are being created or lost. You can't just look at the total number though because it includes government employee numbers and these don't say much about the economic growth. For January, total nonfarm is -20,000; if you net out the -8 for the government it's still almost flat. Differences in hours worked, which is much more relevant, is also almost flat (Jan '09 was 34.2 and the numbers for Nov, Dec, and Jan '10 are 33.9, 33.8 and 33.9 respectively. Ideally, one wants to see a number over 41 so the economy is still struggling but it's not tohu-bohu. Looking at the manufacturing component of that (which is a good indication of economic activity), the numbers are also flat which is encouraging (39, 39.6, 39.6, and 39.9 for Jan '09, Nov, Dec, and Jan '10 respectively). It would be nice if they were a bit higher but again not a catastrophe.

The numbers that are troubling are the number of long-term unemployed Table A-12). Those unemployed 27 or more weeks were (in thousands) 2,742 in Jan '09. In Dec '09 they were 5,896 and in Jan '10 the number is 6,423. However, if the number of unemployed 5 weeks or less goes up it's almost worse because this means there is a spike up in layoffs. This unadjusted number was 3,464 (all #s are in thousands) in Jan '10 up from 2,871 in Dec. However it's down from 4,137 in Jan '09 and that's quite a decrease. The seasonally adjusted number is more relevant and that shows up 3008 in January from 2929 in Dec which is not much of a jump at all and it's down from the 3,633 in Jan '09. I compare the up/down for the months to the report the same time for the last three years but, as I'm always reading in this forum, I don't want to spoon feed anyone so I won't bother revealing that.

Another area of interest is watching the changes by industry. All of these net to the total number that's bandied about. This is table B1 and anyone truly interested in getting a look on which sectors are leading and which are lagging should peruse it each month. I'm not going to go through it but there are no shockers here and it's pretty much what you'd expect. With other data in the report you can also glean percentages as to what industries are adding payroll.

The issue of the under-reported is where people come up with numbers that are sometimes double what the government reports. These are the people too discouraged to look and those that really want full time work but have been forced into accepting part time jobs. The government numbers do try to recalculate based on this and it's found in table A15. Here the number for Jan '10 is a walloping 16.5 seasonally adjusted which it really has to be. Before the doom and gloom crowd starts storing up supplies and hoarding guns and gold, though, it's important to note that this number has been decreasing, albeit slowly (numbers for Sept to Dec are 17.0, 17.4, 17.2, and 17.3). It's up from the 14.5 of Jan '09. However, again, employment numbers lag so that needs to be taken into consideration.

© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

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