While the politicians wrangle over how much to cut spending in the USA, this coming week the country gets its report card on employment – ADP on Wednesday, Department of Labor unemployment claims on Thursday, and the Bureau of Labor Statistics monthly report on Friday.
Even though the data from each of these private and public sector organizations do not exactly align – each provides a piece of the employment puzzle.
So what will the jobs picture look like for January 2011? The analysts seem to favor a rise in non-farm payrolls of a little over 100,000. The Bank of Tokyo – Mitsubishi UFJ (BTMU) believes the unusually harsh winter weather will put an unexpected wobble on January’s job numbers.
On Wednesday, February 2nd the ADP private payroll count will be released. This is a closely watched report as it comes just days prior to the BLS payroll report. The ADP report will have difficulty picking up any weather-related impact on payrolls because ADP counts all workers on payrolls whereas the BLS only counts those that were on payrolls and able to work during the survey week.
The storm has already wobbled the Department of Labor’s unemployment claims releases according to BTMU.
In the week ending January 15, 2011, the Department of Labor reported that initial jobless claims dropped by -37K to a level of 404K. The knee-jerk reaction was to celebrate because the drop in claims occurred during the BLS payroll survey week, which may lead to lofty expectations for January job growth. Unfortunately, the drop in claims can’t be considered a “clean” reading because the big snowstorm in the South would have made filing a claim during that week more difficult for people living in a large swath of the country, which would in turn depress the number of claims.
The weather likely had an effect in the weekly claims also for w/e 22January. And BTMU has reminded of the BLS uncertainty in past sever weather situations.
A good example is the massive snowstorm that hit the mid-Atlantic and Northeastern states in February 2010. According to the BLS in its release of February payrolls, “Severe winter weather in parts of the country may have affected payroll employment and hours; however, it is not possible to quantify precisely the net impact of the winter storms on these measures.” Indeed, payrolls were originally reported to have dropped by -36K in February 2010, then were revised upward to a lesser decline of -14K in the subsequent report1, while March payrolls, as originally reported, shot up by +162K. The outsized increase in March payrolls suggests that February payrolls were depressed by weather, but as the BLS pointed out, it is difficult to determine by just how much. In the end, the originally reported decline in February payrolls was revised away and today stands as an increase of +39K, so a rough estimate could be that the weather-related impact on payrolls in February 2010 was roughly 75K.
The bottom line is that all the labor data we will see this coming week will be suspect. This time, not because of poor methodology – we can blame the weather. Meanwhile, consumer sentiment remained at levels near the lows seen for previous recessions, while the advanced reading on 4Q GDP improved from the final 3Q number. This is a continuation of Main Street not experiencing a Wall Street recovery.
Economic News this Week:
Econintersect economic forecast for January 2010 pointing to a slightly improving economy. This past week the Weekly Leading Index (WLI) from ECRI slipped from 4.1 back to 3.5. Although the overall level implies the business conditions six months from now are as good or better then today – this was a break in the upward momentum of this index (click to enlarge).
Initial unemployment claims in this past week’s release had a large increase. The point made earlier in this article about the weather being responsible is particularly applicable here. One week is not a trend, and it remains important to follow the four week moving average for analysis of unemployment to smooth out the reporting idiosyncrasies (click to enlarge).
Caveat: one month does not make a trend.
The table below itemizes the major events and analysis this past week.
Weekly Economic Release Scorecard:
|4Q2010 USA GDP ||Up 3.2% ||Likely this number is low as this is an advance estimate with the second half of 4Q being particularly strong. |
|December Pending Home Sales ||Up 2% ||Based on pending home sales, January home sales will be the same as the last two years |
|December Chicago Fed National Activity Index ||increased to +0.03 from –0.40||This is a volatile index and can only use the 3 month rolling average which increased to –0.22 from –0.36|
|December Durable Goods||New orders down 2.5% ||New orders are flat, but with YoY data trending down – it points to a flat economy also. |
|January FOMC Meeting ||Only thing new is no dissent as Thomas M. Hoenig, the Kansas City Fed Chief, was rotated out.|
|December New Home Sales ||Up 17.5% ||Maybe 10% up – but 10% above terrible is terrible. |
|November Case-Shiller ||Down Slightly ||November data consistent with National Association of Realtors, CoreLogic, and Altos Research.|
|January Conference Board Consumer Confidence ||Up Significantly ||Stepping back, consumer confidence is still terrible |
|India Inflation Crisis ||Talking through Indian events |
|Global Food Crisis ||The global economy is back to pre-recession situation of food prices rising faster then the poor nations can afford. |
|China Savings Rate ||Rising Chinese consumer uncertainty is causing higher saving rate. |
|India Food Prices ||Rising food prices may impact economic growth |
|Opinion: Low Interest Rates ||Low interest rates end up as a subsidy to banks |
|Opinion: FINRA vs. FPA||Penalties are important in regulation of investment advisors. |
|Opinion: Dodd-Frank Act ||Implementing this law is becoming a problem |
Major Bankruptcy this past week: Javo Beverage Company, Privately-held Summit Business Media Holding