Vikram Saxena

Economic Slowdown: Employment Holding Up Well

fxtrader:

Your posts focus on my interpretation of the job numbers and completely ignore the thesis behind the arguments.

Having worked in 'real' companies before coming to Wall Street, I saw with my own eyes how companies became leaner and more effecient. I also noticed that unlike the past where it was easy to shed excess, there is not much excess left. The unemployment rates for college grads is close to an all time low. That is why I am not at all surprised that job losses in this cycle are not as severe as before.

I also gave specific arguments about why the financial services number is better than what many expected (repo/refi in the mortgage market).

I had gone through the BLS report specifically focussing on the construction and financial sector. Both of them show big year to year losses; construction even shows a month-to-month loss on a seasonally adjusted basis.

All the doom/gloom headlines condemn the birth-death (of companies) model; however they too are shallow in their interpretation. The same bearish pundits did not mind when the same model contributed to a big loss in January.

If you take a dispassionate look at the birth-death model, you will see some correlation with reality.

-The fourth quarter of last year was the time when the economy really hit the brakes and consumer spending plumetted. So it is not surprising that a lot of businesses did not survive the weak Christmas season and shut down (death of businesses).

-Right now, the economic trends (ISM indices) are reversing their downward trend and after accounting for seasonal factors, it is likely that the new business formation is increasing. This is being reflected in the birth aspect of the birth-death model.

Economic Slowdown: Employment Holding Up Well

fxtrader07:

The anger in post seems to suggest that you are short the dollar and are a bit unhappy about the last week. If you had read through my post, you would have noticed the link to the BLS report which has all the details. My article is not based on a cheat sheet someone sent to your trade desk.

-As I have noted, the report still indicates a 90K drop in financial services on an year to year basis, but a recent uptick. I strongly believe that the uptick is coming from the retail mortgage industry which has been decimated and is ready for a big refinance wave.

- Similarly page 20 of the report says that the construction industry lost 61K jobs between March and April on a seasonally adjusted basis. It did gain jobs on a non-seasonally adjusted basis which is due to the end of winter when construction activity resumes in the snow-bound areas of the US. There are about 200K more unemployed workers in the construction industry right now compared to an year ago. There is nothing which suggests manipulation; all data points to a industry in deep recession.

-The birth-death model takes into account new business formation and the death of old businesses and the time-lag between their formation/death and collection between the employment generated ( www.bls.gov/web/cesbd.... ). The same model contributed to a loss of 378,000 jobs in January 2008 which contributed to the bear-case. You want the cake and eat it too?