Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelertoing Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

U.S. January Employment Report Suggests Continutation of Fed Easy Monetary Policy Stance

Economics / US Economy Feb 05, 2011 - 05:10 AM GMT

By: Asha_Bangalore

Economics

Diamond Rated - Best Financial Markets Analysis ArticleThe January employment report includes special factors, so the format of today's commentary is different from the procedure we follow for each month's employment report.  The comment starts with a discussion of the special factors, followed by a conclusion, and ends with an analysis of customary details. 


The employment report for each month is compiled from two surveys - household survey and establishment survey.  The unemployment rate, derived from the household survey, fell to 9.0% in January from 9.4% in December and 9.8% in November (see Chart 1).  This is significantly bullish, given that the jobless rate has declined eight-tenths of a percentage point in a short span of two months.  At the same time, overall payroll employment rose only 36,000 in January (see Chart 2) and private sector payrolls climbed 50,000 (these estimates are from the establishment survey).  At first blush, these headlines present a mixed message. 


However, there are three aspects to note that will help in interpreting today's report:  (1) Inclement weather distorted survey results.  The Bureau of Labor Statistics (BLS) indicated that 886,000 people were not at work in January due to bad weather as per the household survey (see Chart 3).  The count for January 2011 is high compared with similar tallies reported over the past decade for the January-February months, with the exception of the number reported for February 2010.  The status of these people in the labor force is still classified as "employed" in the household survey.  However, they would not be counted in the establishment survey.  The impact on the establishment survey count is a reduction in payrolls but the precise number is unclear.



(2) In January of each year, the BLS includes population adjustments in the estimates of the labor force which is an additional source of difficulty for interpretation of data.  (3) Payroll estimates, from the establishment survey, include benchmark revisions going back to April 2009.  These three factors make it challenging to draw firm conclusions from the data published today; essentially, we need 2-3 months of additional employment data to get a clean assessment of labor market conditions. 


In the meanwhile, we can use other information from the BLS to evaluate the current status of the labor market.  Table 1 is a comparison of data from the establishment survey and adjusted household survey numbers such that comparisons are on an apples-to-apples basis.  Employment estimates from the two surveys differ because they are based on different concepts of employment and estimation methods.  Three sets of numbers are listed in the table - payroll numbers as we see in the headlines of the report and adjustments to the household survey estimates after adjusting for population changes and consistent with the payroll survey concept of employment. 

                Source: http://www.bls.gov/web/empsit/ces_cps_trends.pdf.


1 - Payroll estimates for December 2010 and January 2011 are subject to revision.
2 - Adjusted for changes in population.
3 - Adjusted for changes in the population and the concept of employment in the payroll survey.
4 - The National Bureau of Economic Research established that the recession began in December 2007 and ended in June 2009.  Therefore, the peak of the prior business cycle is December 2007 and trough of the current business cycle is June 2009. 

The main takeaway from these numbers is that the number of jobs created since the recovery commenced in June 2009 is troubling and raises the level of concern for policymakers.  As shown in table 1, during the 19 months of economic recovery total payroll employment has dropped 284,000, while private sector payrolls have risen only 94,000 (not shown in Table 1).  Employment, as measured by adjustments to household survey data, also show declines.  Chart 4 illustrates the level of employment as noted in the three measures of employment in Table 1 and also includes private sector employment.  The most compelling point of Chart 4 is that the level of employment, irrespective of how it is measured, is still significantly below the prior peak even after 19 months of economic growth. 


 
Therefore, data from both surveys strongly suggest that job creation is proceeding in the desirable direction but at a tepid pace such that it is does not offer sufficient justification for the Fed to end the $600 billion purchase of Treasury securities (also known as QE2) before the planned expiration date of June 2011.  In light of this information, it is hardly a astonishing that Chairman Bernanke, indicated the following in his speech on February 3, 2011:  "Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established."

Proceeding to details from the household survey, the labor force fell 504,000 in January after posting declines during each month since October and a nearly steady reading in September.  Typically, in a growing economy, the labor force grows.  As Chart 5 indicates, the labor force has failed to post a meaningful year-to-year increase after 19 months of economic growth.  The current trend is a new feature in the entire post-war period.  It should not be surprising to see an expansion of the labor force in the months ahead and a slightly higher unemployment rate, if employment falls short of the growth in the labor force. 


 
The participation rate inched down in January (64.2% vs. 64.3% in December) and the employment-population ration edged up (58.4% vs. 58.3% in December).  The broader measure of unemployment fell to 16.1% in January from 16.7% in December (see Chart 6), the lowest since April 2009.  The median duration of unemployment declined to 21.8 weeks from 22.4 weeks in December.  The percent of the unemployed who have been unemployed for six months and over fell to 43.8% in January from 44.3% in November.  In sum, although measures of unemployment remain at unacceptable levels, the January readings point to improving labor market conditions. 


 
Details of the establishment survey indicate that firms have not raised their payrolls at a robust pace in January.  Overall payrolls increased 36,000 and private hiring increased 50,000 in January, which is disappointing given that the economy has registered 19 months of growth.  The BLS published benchmark revisions from April 2009 in today's report.  As a result of the benchmark revisions, total payroll employment increased 909,000 in 2010, which is 215,000 lower than the prior estimate and private sector payrolls increased 1.145 million in 2010 vs. a gain of 1.346 million before revisions. 

In January, bad weather contributed to a reduction in construction employment but factory hiring increased and overall service sector employment rose only 18,000.  The highlights of changes in payroll employment in January 2011 are listed below.

Highlights of changes in payrolls during January 2011:
Construction: -32,000 vs. -17,000 in December
Manufacturing: +49,000 vs. +14,000 in December
Private sector service employment: +32,000 vs. +146,000 in December
Retail employment: +28,000 vs. +3,000 in December
Professional and business services: +31,000 vs. +54,000 in December
Temporary help: -11,400 vs. +38,100 in December
Financial activities: -10,000 vs. no change in December
Health care employment: +10,600 vs. +26,700 in December

In January, hourly earnings increased 0.4% to $22.86, a noticeable jump but not problematic as it yields a year-to-year gain of only 1.9%.  In addition, the high level of unemployment indicates that it is by no means a signal of future wage inflation.  The mild growth in payroll employment and the strong increase in hourly earnings points to a more-than-moderate increase in personal income during January.  The steady manufacturing man-hours index suggests an unchanged reading of factory production in January. 

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2011 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules