JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS

COMMENTARY NUMBER 275
Employment Outlook Update, New Site Feature

February 3, 2010

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Revisions Allow for Unusual January Jobs Reporting

Meaningful Payroll and Unemployment Deterioration Ahead

New Site Feature: Content-Index Navigation Tool

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PLEASE NOTE: The next scheduled Commentary is for Friday, February 5th, following the release of January 2010 employment and unemployment. It will include detail of the benchmark revision to payroll employment.

– Best wishes to all, John Williams

 

Payroll Employment and Unemployment Rate (January 2010). This brief Commentary is the promised update to the outlook for the January employment and unemployment data, due for release by the Bureau of Labor Statistics (BLS) on Friday, February 5th. Briefing.com shows consensus expectations of roughly a 13,000 jobs gain (down from a 50,000 jobs gain expected a week ago), following an 85,000 jobs loss in December, with the unemployment rate holding at 10.0%. Generally, I still look for weaker-than-expected numbers, with a rising unemployment rate and a negative payroll change, although revisions pending to both series in Friday’s release allow for unusual variability and volatility in the headline numbers. 

As to seasonally-adjusted monthly payroll-employment change, keep in mind that the 95% confidence interval for the headline jobs change is +/- 129,000, so anything between a jobs loss of 116,000 and a gain of 142,000 statistically would be consistent with the consensus outlook. Suggestive of unusual activity in the reporting system, however, the headline jobs-change number usually comes in amazingly close to consensus.

Key to the payrolls in Friday’s report is the annual benchmark revision, which has been promised as a big negative for early 2009 reporting. Usually those changes to total payroll employment would be carried forward and enlarged in current reporting. Something close to a 2 million downside revision in currently estimated payrolls would not be unusual, with the last reported monthly change (an 85,000 jobs loss in December) pretty much holding in revision. Anything is possible, however, in this volatile political environment.  The reporting errors discussed by the BLS earlier in 2009 suggest a major overhaul or scrapping of the Birth-Death Model would be appropriate, but such does not appear to be in the works.

The unemployment rate went through its annual seasonal-adjustment revisions last month, and new population estimates will be introduced in Friday’s report and used for the January 2010 unemployment rate estimate. As a result of the population changes, the January 2010 unemployment rate will not be consistent or directly comparable with the reported December unemployment rate of 10.0%. Nonetheless, the January unemployment rate likely will be somewhat higher than December’s number. 

Irrespective of January’s reporting, as the economy turns increasingly to a new downside in the months ahead, monthly payroll changes can be expected to show a pattern of deepening contraction, and the unemployment rate can be expected to rise sharply.

Seasonals Again Bloat Monthly Gains in Purchasing Managers Survey. The seasonally-adjusted January 2010 ISM purchasing managers manufacturing survey surged in Monday’s (February 1st) reporting, with the seasonally-adjusted diffusion index (50.0 and above is positive) rising to 58.4 from a revised 54.9 (was 55.9) in December. Much of January’s reported gain relative to December was due to the annual revision of seasonal factors provided by the Commerce Department, which shifted some relative economic strength from late in the year to earlier in the year. For example, what had been a reading of 52.0 for December’s employment index revised to 50.2 with the new seasonal factors, making the December to January gain look much stronger than it would have been otherwise. Nonetheless, the January index did show a stronger manufacturing sector than did the December survey.

This morning’s (February 3rd) nonmanufacturing survey showed the January index rising to 50.5 from 49.8 in December, but December had been 50.1 before the new seasonal factors. The nonmanufacturing employment index rose to 44.6 (still in contraction territory) from a revised 43.6 (previously 44.0).

Of some significance in both the manufacturing and nonmanufacturing sectors were rising price indices and related comments suggesting mounting inflationary pressures in most areas except foods. In the manufacturing sector, where the price index is not seasonally adjusted and not revised, the index rose to 70.0 from 61.5.

Other Employment Indicators. Beyond the ISM’s January employment indices, which tend to be leading to the government’s February, not January data, reporting was mixed.

While the seasonally-adjusted December help-wanted advertising continued to bottom-bounce one point above its historic low, the Conference Board’s help-wanted advertising (online) exploded in January versus December. At work in the online index likely is severe seasonal-factor distortion, where the seasonals are based on a very limited history that has not seen much in the way of positive economic growth. While these data are seasonally adjusted, the unadjusted data are not available. Accordingly the impact of seasonal distortion cannot be quantified, but it likely was a major contributing factor. The online index’s limited history also make it difficult to assess what portion of any reported growth might be attributed to the growing use of the Internet media.

As to seasonally-adjusted weekly new claims for unemployment, the pace of reported decline has slowed or reversed recently (declining claims is an economic positive), but the series remains heavily distorted by warped seasonal factors, as discussed last month (see Commentary No. 269).

While upcoming economic reports may be unusually volatile, the trend towards renewed economic downturn should begin to surface in reporting of January and February data as they become available this month and next.

New Site Feature: Content Index Designed to Improve Navigation around ShadowStats.com. We are pleased to present a new "Content Index" feature on the ShadowStats.com website. You can find this via the new "Content Index" link towards the left on the main navigation bar at the top of the Web pages (where "Latest & Archives" tab used to be).

The new index encompasses four pages:

- Commentaries by Date. This is similar to the old "Latest & Archives" page in that it lists, by publication date, summaries of and links to all current and past Commentaries. The Commentaries, however, now are sectioned and searchable by calendar month, stretching back over five years.

- Topics & Data Releases. This is an entirely new feature which allows you to find those sections within Commentaries which address specific topics.  So, for example, should you wish to find analysis of the latest Employment report, go to the "Topics & Data Releases" page, and you will find that the fifth row, "Employment" offers both a link to the latest analysis and a drop-down menu giving links to previous analyses.

This "cross-indexing" of the Commentaries’ analyses should be of benefit in finding particular areas of interest and in referring back to prior analyses.

Please note also that the top row, "The Week Ahead" is a handy means of quickly referencing what is previewed for the coming few days’ data releases.

- Primers & Reports. This page simply combines, in one place, sets of links to all Primers, Special Reports and Reporting/Market Focus Reports.

- Search Text. There is no change to the existing Search page except for its integration with the three pages above as part of the expanded features in "Content Index."

We hope that you will find this useful and, of course, welcome and invite your comments and suggestions on the Site.

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