The 'Helicopter
Economics Investing
Guide' is meant to help
educate people on how to
make profitable investing
choices in the current
economic environment.
We have coined this term
to describe the current
monetary and fiscal
policies of the U.S.
government, which
involve unprecedented
money printing. This is the
official blog of the New
York Investing meetup.
Economics Investing
Guide' is meant to help
educate people on how to
make profitable investing
choices in the current
economic environment.
We have coined this term
to describe the current
monetary and fiscal
policies of the U.S.
government, which
involve unprecedented
money printing. This is the
official blog of the New
York Investing meetup.
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Sorting Out
Contradictory Jobs
Information
Daryl Montgomery
09/02/2010
Contradictory Jobs
Information
Daryl Montgomery
09/02/2010
Four jobs related reports were released in the first two days of September and they
seem to indicate a contradictory view of the U.S. employment situation.
The weekly unemployment claims number was 472,000 for the last week of August,
almost exactly the same as the 470,000 figure for the first week of January. Payroll
processing firm ADP predicted yesterday that the U.S. private sector lost jobs in August
because of a big employment drop in the 'goods producing sector'. At almost the
same time, the ISM manufacturing index was released and indicated substantial hiring
took place in U.S. manufacturing companies in August. Adding more confusion to the
mix, outplacement firm Challenger, Grey, and Christmas said there was a sharp drop in
planned layoffs in August.
The rule of thumb for recession is a weekly claims level over 400,000. This has existed
continuously in the data for over two years now. Eight months into 2010, the only
difference from the beginning of the year is that the four-week moving average is now
20,000 higher at 485,500. At no point during the 'recovery' did weekly claims fall to a
level indicating the Great Recession actually ended. Weekly claims however should
automatically fall during a protracted recession because big companies can only cut
so many jobs until they get to a bare bones staff. This doesn't mean the economy is
getting better, it means there is no one left to lay off. The Challenger, Grey and
Christmas report on planned layoffs supports this view. Weekly claims will remain high
under such circumstances if a lot of companies are going out of business because of
ongoing recessionary conditions.
While there is no inconsistency with the weekly claims and the Challenger, Grey and
Christmas data, the ADP and ISM employment data directly contradict each other.
ADP's numbers are based on payroll processing while ISM's numbers are based on a
survey of purchasing managers (the government's employment report is also based on
surveys). The ADP report stated there was a significant drop in manufacturing hiring in
August and the ISM report claimed there was a significant gain. The ISM report also
showed a decline in the new orders component (Why would there be a substantial
increase in hiring when there is less work to do?). Perhaps we will get some clarification
in the government's August employment report tomorrow.
There will be no sustainable economic recovery until private sector hiring picks up. This
hasn't happened yet. While the mainstream media has reported otherwise,
government numbers on private sector hiring include education jobs (almost all of
which are government) and health care jobs (many of which are paid for indirectly by
government programs). The private sector temporary jobs category in the employment
report also has a footnote stating jobs from other categories are included. Could those
other categories be government jobs? Looks like it, since once the Census stopped
hiring, new temporary employment seems to have dried up. At the moment, it looks
like any real recovery in private sector employment is a long way off.
Disclosure: No positions.
Daryl Montgomery
seem to indicate a contradictory view of the U.S. employment situation.
The weekly unemployment claims number was 472,000 for the last week of August,
almost exactly the same as the 470,000 figure for the first week of January. Payroll
processing firm ADP predicted yesterday that the U.S. private sector lost jobs in August
because of a big employment drop in the 'goods producing sector'. At almost the
same time, the ISM manufacturing index was released and indicated substantial hiring
took place in U.S. manufacturing companies in August. Adding more confusion to the
mix, outplacement firm Challenger, Grey, and Christmas said there was a sharp drop in
planned layoffs in August.
The rule of thumb for recession is a weekly claims level over 400,000. This has existed
continuously in the data for over two years now. Eight months into 2010, the only
difference from the beginning of the year is that the four-week moving average is now
20,000 higher at 485,500. At no point during the 'recovery' did weekly claims fall to a
level indicating the Great Recession actually ended. Weekly claims however should
automatically fall during a protracted recession because big companies can only cut
so many jobs until they get to a bare bones staff. This doesn't mean the economy is
getting better, it means there is no one left to lay off. The Challenger, Grey and
Christmas report on planned layoffs supports this view. Weekly claims will remain high
under such circumstances if a lot of companies are going out of business because of
ongoing recessionary conditions.
While there is no inconsistency with the weekly claims and the Challenger, Grey and
Christmas data, the ADP and ISM employment data directly contradict each other.
ADP's numbers are based on payroll processing while ISM's numbers are based on a
survey of purchasing managers (the government's employment report is also based on
surveys). The ADP report stated there was a significant drop in manufacturing hiring in
August and the ISM report claimed there was a significant gain. The ISM report also
showed a decline in the new orders component (Why would there be a substantial
increase in hiring when there is less work to do?). Perhaps we will get some clarification
in the government's August employment report tomorrow.
There will be no sustainable economic recovery until private sector hiring picks up. This
hasn't happened yet. While the mainstream media has reported otherwise,
government numbers on private sector hiring include education jobs (almost all of
which are government) and health care jobs (many of which are paid for indirectly by
government programs). The private sector temporary jobs category in the employment
report also has a footnote stating jobs from other categories are included. Could those
other categories be government jobs? Looks like it, since once the Census stopped
hiring, new temporary employment seems to have dried up. At the moment, it looks
like any real recovery in private sector employment is a long way off.
Disclosure: No positions.
Daryl Montgomery
Real e Finance
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