Thursday, February 04, 2010

Employment Report Preview

by Bill McBride on 2/04/2010 03:22:00 PM

The BLS will release the January employment report tomorrow morning, and the consensus forecast is for a small net gain in payroll jobs in January, on a seasonally adjusted (SA) basis, and the unemployment rate flat at 10.0%.

A few points on the employment report:

1) the annual benchmark revision for March 2009 will be released as part of the report. The preliminary estimate was for 824,000 more jobs lost than the original reports (my graphs will include the revisions),

2) January is heavily adjusted for seasonal factors - even in good years there are around 2.5 million payroll jobs lost in January. The SA number is the one to follow.

3) The ISM Manufacturing report suggested some small job gains in the manufacturing sector.

ISM's Employment Index registered 53.3 percent in January, which is 3.1 percentage points higher than the seasonally adjusted 50.2 percent reported in December. This is the second month of growth in manufacturing employment, and the highest reading since April 2006.
4) The ISM non-Manufacturing report suggested more job losses in the service sectors.
Employment activity in the non-manufacturing sector contracted in January for the 25th consecutive month. ISM's Non-Manufacturing Employment Index for January registered 44.6 percent.
5) The ADP report showed private sector job losses of 22 thousand in January. Recently ADP has usually indicated more job losses than the BLS, but that isn't always true. Also the ADP report mix was inverted from ISM, with ADP showing job growth in the service sector and job losses in manufacturing:
Nonfarm private employment decreased 22,000 from December 2009 to January 2010 on a seasonally adjusted basis ... January’s ADP Report estimates nonfarm private employment in the service-providing sector increased by 38,000, the second consecutive monthly increase. However, this employment growth was not enough to offset continued losses in the goods-producing sector.
6) The initial weekly claims number this morning would suggest continuing job losses.
In the week ending Jan. 30, the advance figure for seasonally adjusted initial claims was 480,000, an increase of 8,000 from the previous week's revised figure of 472,000. The 4-week moving average was 468,750, an increase of 11,750 from the previous week ...
There other are factors too - like the weather (cold in early January), and Census Bureau hiring (probably minimal).

And finally, it is important to remember that the economy needs to add something close to 125,000 jobs per month just to keep up with the growth the working age population.