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Friday, June 03, 2011

Friday's Dose of Castor Oil News

Weekly rail: Carloads up 0.7% YoY. It was a bad week for intermodal. YTD YoY carloads are still dropping and are now at 3.2%. Intermodal is still at 8.5%. Detail (pdf).

Turkish inflation jumped from 4.3% to 7.2% in one month? Really?

The biggie - US monthly employment. I am slightly encouraged by this because it could have been worse, but it is about 90K down from even the reduced expectations, so this is another huge "unexpectedly" for the hapless markets. I thought the unemployment rate would rise, and it rose from 9.0% to 9.1%. The expectation, although I cannot figure out what type of mushrooms sustained this belief among economists, was for a drop to 8.9% unemployment. Alternatively, it may not be psychedelic drugs. It may be frank psychosis. CR cracked and called May car sales predictions "absurd", so I am not the only one goggle-eyed over the lack of reality-perception.

Household: Total employed rose 105K, and the employment/population ratio stayed at 58.4%. Total unemployed rose 167K. The most negative change was in duration of unemployment - 27 weeks or over rose 361K. Table A-8 shows that the rise in employment came from farmers getting into the fields - more than all the increase was in ag. Non-ag industries lost 44K on the month; the two month total (seasonally adjusted or SA) is -187K. Job losses are in government jobs with private still gaining a bit. One of the indicators I watch closely is the part-time for economic reasons, and this total has grown by over 100K over two months. Slack work (part-time due to lower business activity) has grown by over 200K in the last two months.

Table A-15, Unemployment measures: Out of work 15 weeks or longer rose from 5.1 to 5.3%. This indicator had dropped earlier in the spring when jobs were doing better. We are still a bit better than in January - employment in the first quarter did very well! Job losers and persons completing temp jobs rose from 5.3% to 5.4%. The rise in initial claims suggested this result.

Establishment: Different numbers, but the same basic picture, with private industries gaining 83K jobs and government losing 29K jobs, for a headline of +54K jobs. Here I want to add a cautionary note: the net birth-death adjustment for May is +206K, with, for example, 35K on construction, 6K on manufacturing, etc. So you have to take these numbers with a dose of salt when initial claims show changes, and especially if Treasury wage taxes show changes. If claims/employment taxes are going up, the B/D adjustment is too small, and if claims/employment are trending down, the B/D adjustment may well be too much.

Another change indicator is temporary employment agencies, the official number is -1.2K for May. The temporary agencies number is a pretty good indication of trend.

Last, NFIB will release its full May report next Tuesday, but it released a preliminary jobs report:
“After solid job gains early in the year, progress has slowed to a trickle. The two NFIB indicators—job openings and hiring plans—that predict the unemployment rate both fell, suggesting that the rate itself will rise.

“May’s job numbers will disappoint; meaningful job creation on Main Street has collapsed.
This is not surprising at all - retail numbers were reported lower, for example.

It's due to the consumer wallet crunch Walmart has been noting. Note that NFIB is a separate indicator concentrated on retail and smaller service businesses; thus the trend NFIB has been seeing is not directly caused by the Japanese problems. The same is true for NACM. We are see a cash flow crunch, and that crunch will not improve in the near term.

Fewer dollars and each dollar buys less.
At least the banker bonuses went out on time.

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