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Friday, November 05, 2010

What A Crappy Week

Update: In this employment release, BLS is announcing a change in its birth-death methodology once again to take effect next year, which should improve matters. (Current Birth-Death factors.)
  |Effective with the release of January 2011 data on February 4,   |
|2011, the establishment survey will begin estimating net busi- |
|ness birth/death adjustment factors on a quarterly basis, re- |
|placing the current practice of estimating the factors annually. |
|This will allow the establishment survey to incorporate infor- |
|mation from the Quarterly Census of Employment and Wages into |
|the birth/death adjustment factors as soon as it becomes avail- |
|able and thereby improve the factors. Additional information on |
|this change is available at |
End update.

Oh heck. I know the headline number for jobs is good, but when you look at the household survey it just isn't there.

Here's the official Table A-1. Emp/population ratio falls YoY no matter whether you look at NSA or SA data 58.8 > 58.6 or 58.4 > 58.3. That is just a kick where it really hurts.

If you look at raw month over month, we added a piddling 35K jobs. Seasonal adjustment turns that into a monthly loss of over 300,000 jobs. If you look at SA month over month, we lost 330,000 jobs. I do not like that, but it is pretty consistent with ADP's last two months. The two month SA employed change in this survey is about -190,000, which works well with ADP data. I have noticed that when ADP and household survey go in different directions they tend to even out over a couple of months when you adjust for government jobs.

Table A-15 Alternative Measures of Unemployment. U-1 rose 0.2%. In this table you can clearly see this summer's education layoffs traveling through the various stats. Job losers (U-2) rose in August and September and fell 0.2% in October. We are not making progress at all on clearing the backlog of unemployed. U-5 rose 0.1% to 11.1%; U-6 fell 0.1% to 17.0%. U-6 is the broadest indicator and it includes involuntary part-time workers. Since this summer U-6 has risen half a percentage point. U-4 (unemployed plus discouraged) rose to 10.4%. U-4 has risen 0.2% since this summer.

Table A-8
It's clear that over the past year, the private economy has added jobs. Unadjusted Oct-Oct, household (maids, nannies, etc) employment dropped 140,000. However other industries (real private non-ag wage and salary workers rose about a million. That's really good.

Unadjusted, government employment fell almost a million and a half during that same period. Some of that government jobs figure involves Census workers, which were just a blip anyway. Still, I cannot figure out how the seasonal adjustment converts the raw loss of 1,475 government jobs to a YoY loss of only 400,000. This appears impossible.

I was thinking that I could use this numbers to back in an estimate of the education/local gov component of unemployment but no, that's not going to work.

I was going to publish something about tax receipts because Brian asked for it, but that will have to wait for tomorrow because I don't have all the data yet, and there's a huge bunch of caveats to go along with it.

We have a discontinuity in this data because there was a coordinated effect from school closures this summer. That's going to insert a "step" downwards in the tax data.

Looking at this employment release, ag wage and salary hiring showed up with very strong year over year increases. Probably commodity prices have something to do with it. That may be offsetting some of the negative blip caused by school closures.

I have a busy day today, and I'll try to get back to this subject tomorrow. At any given time, as much as 20% of economic data series have discontinuities in them. Because the series tend to correlate, discontinuities will propagate if ignored. So I tend to "skip" periods of discontinuity. I mark them down in a big table as they appear, and then the next year when it comes around I know that such-and-such a stat will not be reliable as to underlying trend. This includes everything from hurricanes and storms around the world to things like a coordinated wave of school closings and layoffs. A one-off is just a one-off.

The consumer credit survey is due from the Fed at about 3:00 PM today, and you can get it here once it is published. It's G.19. Credit card consolidations may be shifting some debt from the revolving to non-revolving categories round about now. I am also watching for Q3 bank delinquency and chargeoff data. The next Terms of Business Lending survey is due soon and should also be interesting.

Oh, and about services? Clearwire, baby. And Dish lost a lot of subscribers this quarter - they are offering more services to subscribers to try to bulk revenue, and right now it is working. Whether it lasts will depend upon the fundamental economic trajectory. Brian sent me a link to the Time Warner Cablevision call yesterday, in which they were discussing the downward pressure from the lagging consumer economy. Here's a brief summary of trends. I don't usually track this stuff, and I was happy to get Brian's commentary. It's an issue right now because this is one area that could be a real weakness in private employment over the next three quarters.

The distress indicators I am seeing in mass-market retail tell me that a lot of families must be on the edge of cutting spending in services.

If consumers have a choice between keeping internet or keeping cable TV, most choose to keep the internet and go with Netflix and Hulu for TV. It's much cheaper and customers feel like they are paying for the services they want, rather than paying for a bunch of channels they don't want.

The Olin workers were asked to accept a 7 years
wage freeze, a loss of their HMO, and reductions
in other benefits. The jobs going to Mississippi
will be filled mainly by temp workers without
benefits.The company sold the jobs to Mississippi.
In 7to 10 years they will sell the to Mexico or China.
Same number of jobs, 50% reduction in compensation.
But hey the, unemployment didn't change.
RE: Olin

Mish would/will no doubt be saying it serves the union right and good luck to the laid-off workers in Illinois on finding new jobs that paid 1/2 their old jobs.

Stag Mark would/will no doubt point out that Bernanke is going to see no change in the averages as all the money lost by the laid-off union workers is going to accrue to the executive management and shareholders, in that order.

As for myself, I'll point out that, like the dollar debauchery, the middle class is being stolen from by the upper.
I meant to post this in the last post's discussion since it was about QE2, but events got in the way. It is a question that I know is based on a wrong premise, but I can't figure it out.

I am in my 30's and I bought my first house in 2006 for about $300K. When reality finishes wrecking home values I think mine will settle out at about $225K. The guy I bought it from had originally bought it for $150K, so he made $150K on the deal, about half of it was real appreciation and half was the consequence of a bubble. I was a chump, and I concede the point.

So Bernanke wants to introduce inflation to solve our problems, and I know that my real bad decision cannot be administratively erased. But if he could magically introduce a one time inflation of 25% then I would only be paying off a value of $225K with my nominal $300K of payments. The guy who sold the house would lose 75K of value, but that was bubble money.

Other ramifications would also work themselves out. If Social Security and other entitlements were not adjusted, then they would go a long way toward being solvent. Granted, people who had not saved for retirement would be hurt, but people who had saved would be okay because other asset prices would end up increasing. Banks would lose a ton on credit cards and other consumer loans, but they have more than made up for it in the bailouts they received. It would be a way to transfer all of that money to the middle class that some say has been withheld from them, but it would leave capitalism intact.

I put this argument out there for it to be torn apart because I don't know how to tear it apart myself. I don't like the idea of a fed intervention saving my bacon, but I feel like I am paying too much for my house partly because of a bubble the fed created. Also, some retiree is living large thanks to the fed because he happened to sell at the right moment. And there are also a lot of retirees who are getting way more out of social security than they ever put in, and I will be paying that, too. The housing bubble was, in a way, a form of generational theft because if you happened to be in the window to sell at the right moment you won, and if 2006 happened to be at that point in life when you buy a house, you lost. Thoughts???
Anon 5:41,

There is an enormous assumption in what you wrote. You are assuming that if there is inflation, wages will rise along with asset prices, thus making it easier for the middle class to pay of our debts.

In the current high-unemployment free-trade environment, that is far from a given. More likely is that the prices of the food you must eat and the gasoline you must burn will rise, but your wages will not and neither will the sale price of your home.

In a deflationary hyperinflation, nobody wins, except maybe the banks and politicians.

Stag Mark would/will no doubt point out that Bernanke is going to see no change in the averages as all the money lost by the laid-off union workers is going to accrue to the executive management and shareholders, in that order.

I would!
I'm going to abandon Comcast and go with Clearwire for internet, because I can save a significant amount of money and get a mobile hot spot that I don't have now.

I can live without the cable TV quite easily. Amazingly enough, I survived to the age of 28 without it.

And to be honest, Comcast drove me away.
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