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Friday, February 05, 2010

Very Happy

As one would expect, the household survey showed the turn in jobs before the establishment survey - in this release establishment reports a net job loss but the household survey reports a net jobs gain.

One should believe the household survey, not just on theoretical grounds but because of the change in FUT. Look at January-Feb 2nd 2009/2010 Daily Treasury Statements (MTD for January and February through the 2nd):
Jan-Feb 2nd 2009
WIET: 176,949
CIT: 9,750
FUT: 944
Tot: 194,491

Jan-Feb 2nd 2010
WIET: 167,167
CIT: 8,161
FUT: 984
Tot: 183,999
In most categories, tax receipts are still down YoY. But the net decline has plummeted in recent months, and look at Federal Unemployment Tax, which is up YoY.

According to the employment report, since September 2009 temporary jobs have increased by 247,000. That's the type of thing that generates that rise in FUT.

This release contains adjustments to the household survey and the establishment survey. The population adjustments introduce a discontinuity into the Dec/Jan numbers, which are helpfully summed for us as follows in Table C:

What you can take from this is that the improvement in employment is not an artifact of adjustment.

More on this later - there are some pretty typical rises in self employment YoY, the pop in temporary employment, and rises in hours that show the effect of ramping up production and activity.

You can also look at Table A-11 to confirm the ramp - the distribution of unemployment in the temporary layoff category has fallen from 17.3% in Jan 09 to 13.6% in Jan 10. (Note, numbers I give in this post are not seasonally adjusted for YoY comparisons, but seasonally adjusted for other comparisons).

Table A-14 gives the breakdown of unemployed persons YoY by industry (these numbers are not seasonally adjusted). One of the reason why some more money spent on basic infrastructure (think roads and bridges) would help us so much is that January 2009's eyeball-popping 18.2% construction unemployment rate has only transitioned to a skull-busting 24.7% in January 2010. If you want to address structural long-term unemployment, here is the place that you can make a difference. Further, it is cheaper to work on roads and bridges now than it will be a few years from now, and a lot of the nation's roads and bridges need work.

Our current administration cannot resist going after the glitzy and trendy, but it won't help us much. We truly are in a debt bind (Moody just warned on US credit), so set aside the funding for rail, etc, and buy buses and fix the roads. The boring old tried-and-true will; infrastructure repair is one of the few ways we can introduce current stimulus at almost zero cost when figured over a few years. Both Exurban Nation and Coyote blogs have written about the stupidity of many of the passenger rail proposals. I cannot equal their excellence, so if you doubt my assertion try this and this for starters.

Table A-8 shows that we gained over 600,000 private wage and salary jobs in January. This is far beyond statistical significance. Many of them are in lower-paying industries (establishment retail shows a gain of 42,000), but these are solid gains if we can just keep from messing this up - and each of these gains translates to more activity and spending in the same stores.

Unemployment percentages would look much worse if this were even a decade ago, but the number of retirees is helping us out by draining workers from the work force. You can see the recession ramp in this graph:

U-6 dropped below the 17% range. The number of workers unemployed for 27 weeks or more rose to 6.3 million. Unemployment extensions need to be addressed.

We seem to be on the other side of the mountain. It will not be that easy to stay this course because of income trends, so a careful and plodding adherence to the basics is dictated. It may not be exciting, but it will work. We keep throwing money at stuff that sounds good, but that does not produce any long term benefits. Life is not a Harlequin romance.

adding 42K retail in Jan seems unreal
MoM, long time reader, first time posting.

I think you misstated the following:

Table A-8 shows that we gained over 600,000 private wage and salary jobs in January. This is far beyond statistical significance. Many of them are in lower-paying industries (establishment retail shows a gain of 42,000), but these are solid gains if we can just keep from messing this up - and each of these gains translates to more activity and spending in the same stores.

Earlier you stated you are commenting on non seasonal adjusted numbers, but the +600K
is seasonal. If you use the non seasonal number, we lost jobs.

I like how you reference the tax receipts. Keeps things in prespective.
Anon - I am using non-seasonally adjusted numbers only for year over year comparisons - for example, to compare this January to Jan 09. Otherwise I am using seasonally adjusted (SA) numbers.

There is such a huge seasonal swing in jobs during the year that month to month comparisons or quarter to quarter comparisons without the seasonal adjustments don't make much sense.

Occasionally - rarely - the seasonal adjustment can introduce a degree of distortion during sharply abnormal circumstances. That is not the case here.

As to the tax numbers, I think they show another piece of the story - we have more jobs month over month, but year over year we are still hurting. Also the way the FUT works, it's more of a number of jobs counting function. So one person working two part-time jobs will produce almost double the FUT, but be counted as one employed person in household.

This is a bad one - and all the info I have is that we will be losing a lot of higher end jobs in industries for at least another six months.
M_O_M, I have to offer a tepid defense of rail projects--they're not all created equal.

I'm extremely skeptical of light-rail, because of the design criteria which are fashionable right now. We'd be better off with dedicated bus right-of-way, in most cases. Ditto high-speed. True high-speed rail (>200mph) is probably only feasible in the D.C.-NYC-Boston corridor with today's technology and NIMBYism.

However, some of the projects consist largely of spending on signals, safety equipment, and roadbed upgrades to existing freight lines to permit 120mph operation with reduced delays. It makes sense, because most of these corridors were built for 100mph, and only slowed down when the ICC changed the regulations on signaling and safety equipment in the 1950s. Most of those projects have been in planning for decades, and can be executed fairly quickly. With existing equipment, speeds of 110mph can be attained on good roadbed, and with fewer delays overall average speeds can be improved easily by 25% or better. They also have the added benefit of increasing the possible freight capacity of a line. The return on investment is tangible and quick. The Chicago to St. Louis, Milwakee, and Detroit corridors are excellent examples.
Ronald - no, the numbers I had for retail were upwards of that, but mine cover about a six-seven week period. I would say that is a very good number.

Most of the job gains are occurring in grocery stores and low-end retail. Say stores like Payless, some Walmarts, CH Martin, etc. High-end retail appears to be shedding jobs at closing stores still.
Neil - thanks for your comment, and I agree with that point - that upgrading lines has some potential.

But the worry I have over rail is the new (especially high-speed) projects that seem to make no sense at all, and this is what is being pushed in DC. I think it's the bling factor, but buses generally do more, for less, and can pay. Plus they provide a more general and flexible service.

I could go on and on about high-speed, because I only see a couple of feasible applications in this country. But I won't, because I'm not an expert and I haven't done enough research.

The application for high-speed is city to city (because you can't have many stops and you need the distance to get the payoff). It's not going to help in commuting much, but it's more of replacement of air shuttles. Given recent developments in air, I can see the draw.

In any case, you have to pick up a heck of a ridership to make one of these new lines pay in most areas. Even with upgrades, it's going to be difficult. I have been following the German news about the rail maintenance with great interest.
M_O_M, for >200mph high-speed rail, there is a fairly small region in a four-axis space (distance, population density, top speed, expense of new right-of-way) where it makes sense. There are only a few places in the world that meet these criteria. For example, LA-SanFran would probably work on the first three axes, but fails on the fourth. The only reason the Shinkansen worked was because Japan was completely gutted after WWII anyway--condemning right-of-way is a lot easier when it's already bombed-out.

The 120mph design space opens up quite a bit, because existing diesel-electric locomotives meet the required power-to-weight ratio and the existing roadbeds are more likely to be adequate (and also serve existing markets quite well). In this space, the intermediate stops become much more important; long-distance commuters become a market, for example. Looking forward, with better connections to airports air-to-rail could be another market. The aforementioned LA-SanFran corridor is another good bet for this, as is San Antonio to D/FW.

Does it pay? Depends on how you do the accounting. If you think the Interstate Highway system pays (which I do), then upgrading certain existing lines on existing corridors probably does pay.

"We seem to be on the other side of the mountain. It will not be that easy to stay this course because of income trends, so a careful and plodding adherence to the basics is dictated."

If I could count on commodities no longer being the "sure thing" trade that most seem to think they are then I think I could almost be bullish again.

In any event, this does make me feel better. There's more hope that the TIPS (treasury inflation protected securities) and I-Bonds I own won't be defaulted on at some point in the future.

It would also help if my girlfriend wasn't competing with MBAs for jobs that don't require it, but clearly we aren't even close to that yet.
MOM, road spending is saturated; go look at asphalt prices if you don't believe me. We have literally a couple thousand dams that are below standard and it might be nice to fix them before we get another Johnstown flood. Fixing freight rail bottlenecks (particularly the one near Baltimore) makes good sense as well.
Oh, yes. DAMS!

Roads still need to be fixed though. This last few months of driving from hospital to hospital has introduced me to some potholes of legendary size in the Midlantic. I swear, on 295 in NJ I dodged potholes you could raise fish in.

But I concur on the dams and the dykes - I recall reading some very worrisome information about CA.
M_O_M, as I understand it the infrastructure is worst in states with real fiscal problems due to poor budgeting, like CA, NJ, and IL. The only way to fix those problems under the current governments is to have the Feds take over the road graft...er, I mean construction.

I guess my point is that I'm skeptical one can just wave a fiscal wand at the infrastructure and get money well spent. There's bigger problems in the way at the moment.
Makes sense. It is hard to believe that some of the roads I have seen resulted from full-dollar construction.
Non farm payroll down, prior month revised down, jobless claims trending up again. I'm going with answer (c) Wait for at least another month to reach any conclusion.
CF - oh, I think the down wave is there. Lurking like a tiger in the jungle.

We'll see when the next revision of GDP comes in, but just the fading of the inventory wave is enough to really hurt, and the first take on GDP showed slowing of consumer spending.

I am watching deposits in H.8 with a feeling of dread. I feel almost certain that incomes are too low to sustain the loss of the unemployment benefits without a cycle down.

The other thing a lot of people don't want to admit is that there has been a considerable effective boost of consumers' incomes from non-payment of debt. Six to twelve months of not paying one's mortgage and not paying rent can really help shore up a family's balance sheet. That is coming to an end for many over this next year.
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