by Calculated Risk on 1/05/2013 08:49:00 PM

I wrote several posts about the "debt ceiling" debate in 2011.  The debate clearly scared many Americans and impacted the economy.  Hopefully this time the "debt ceiling" will be raised well in advance of the deadline.

I prefer "default ceiling" because "debt ceiling" sounds like some sort of virtuous limit, when, in reality, the vote is about whether or not to the pay the bills - and voting for default is reckless and irresponsible.

Note: Several financial articles recently have used poker terms - and the title of this post is my contribution to this sad trend.  "The Nuts" is the best possible poker hand in a given situation. Bluffing into the nuts is a losing play - and that is what the Congress is trying to do with the "debt ceiling".  The sooner they fold, the better for the economy and the Congress.

From the WaPo: GOP dissension over debt-ceiling strategy

House Speaker John A. Boehner (R-Ohio) likewise insisted that Republicans hold the line, telling his members they must demand that every dollar they raise the debt limit be paired with commensurate spending cuts.

But other Republicans counseled caution, warning that pressure from the business community and the public to raise the $16.4 trillion federal borrowing limit renders untenable any threats not to do so and will weaken the GOP’s hand if their stance is perceived to be a bluff.

It is a bluff. As Republican Senator Mitch McConnell noted in 2011, if the debt ceiling isn't raised the "Republican brand" would become toxic and synonymous with fiscal irresponsibility.

Part of the problem is some congressmen don't understand economics. Look at this quote from the WaPo article:

“It may be necessary to partially shut down the government in order to secure the long-term fiscal well being of our country, rather than plod along the path of Greece, Italy and Spain,” [Senate Minority Whip John Cornyn (R-Tex.)] wrote.

First, hitting the default ceiling will not just "shut down the government", it will force the government to stop paying some bills (most of the bills are for Defense, Medicare, Social Security and interest payments on the debt).

Second, the US is not plodding along "the path of Greece, Italy and Spain". Geesh.

I reread some of my posts from 2011, as an example Debt Ceiling Charade: The Smart Options.

Option #1: Eliminate the debt ceiling. The debt ceiling is a joke. It serves no purpose except political posturing. It is not about the deficit - it is about paying the bills, and the U.S. will pay the bills.
...
Option #2: Pass a "clean" bill raising the debt ceiling enough to get through the next election (so the politicians don't have to embarrass themselves again). Congress could do this at any time. That is why voters would blame the party controlling the House if the debt ceiling is not raised.

I still prefer Option #1, but one thing is clear, the Congress will fold and the debt ceiling will be raised. There might be some agreement with the "sequester" that gives Congress some cover, and if that is the approach, then Congress should look to settle this early.

In 2011, I started writing about the debt ceiling when it became clear the threat of default was impacting the economy. A couple of old posts: Debt Ceiling Charade impacting Short-Term Credit Markets and Random Thoughts.  From July 30, 2011:

"I remain confident that Congress will raise the debt ceiling; however the circus in D.C. is clearly impacting the economy. This morning I spoke to a business owner who is negotiating a new lease to expand. His lawyer told him not to sign the lease until the debt ceiling issue is resolved. I believe similar caution has gripped business owners and consumers in many places - and impacting consumer and business confidence."

This time I'm going to start criticizing Congress earlier in the process; 2011 was ridiculous and reckless.

by Calculated Risk on 1/05/2013 01:27:00 PM

Happy New Year to all!

The key story of the week was the fiscal agreement. Unfortunately the media did an excellent job of confusing most people.

Remember - the "fiscal cliff" was about too much austerity too quickly (about reducing the deficit too quickly). The "fiscal cliff" included expiring tax cuts (income, payroll), expiring spending (unemployment insurance, etc.) and the "sequester" (a combination of defense and other spending cuts). The sequester has been delayed for two months, so we don't know the size of the cuts yet, but it appears the amount of austerity will not be large enough to drag the economy into a new recession. Still, austerity will be a drag in 2013 and that probably means another year of sluggish growth.

I would have argued for a different mix of policies, but reducing the amount of austerity was achieved - and this was a key goal for the fiscal agreement. Long term debt sustainability is still an issue (not part of the "fiscal cliff"), but the deficit is declining right now, and will decline further in 2013. This agreement contained some short term deficit reduction (just the end of the payroll tax cut will reduce the deficit by around $120 billion in 2013 compared to 2012).

The economic data was mixed. The employment report indicated sluggish payroll growth with the unemployment rate still very high at 7.8%. Auto sales were down from November, but still solid. Construction spending was down in November, but residential construction spending was up (non-residential and public spending was down). And the ISM manufacturing and service indexes increased in December, suggesting some improvement.

It appears 2012 ended with sluggish growth. There are reasons for optimism for 2013, but the austerity at the Federal level will be a significant drag all year.

Here is a summary of last week in graphs:

• December Employment Report: 155,000 Jobs, 7.8% Unemployment Rate

From the BLS:

Nonfarm payroll employment rose by 155,000 in December, and the unemployment rate was unchanged at 7.8 percent, the U.S. Bureau of Labor Statistics reported today.
...
The change in total nonfarm payroll employment for October was revised from +138,000 to +137,000, and the change for November was revised from +146,000 to +161,000.

Click on graph for larger image.

The headline number was at expectations of 157,000.  Employment for October was revised down slightly, and November payroll growth was revised up.

The second graph shows the unemployment rate.

The unemployment rate was unchanged at 7.8% (The November unemployment rate was revised up from 7.7% as part of the annual household report revision). 

The unemployment rate is from the household report and the household report showed only a small increase in employment.


The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate was unchanged at 63.6% in December (blue line. This is the percentage of the working age population in the labor force.

The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although a significant portion of the recent decline is due to demographics.


The Employment-Population ratio decreased to 58.6% in December (black line). I'll post the 25 to 54 age group employment-population ratio graph later.


The fourth graph shows the job losses from the start of the employment recession, in percentage terms, compared to previous post WWII recessions. The dotted line is ex-Census hiring.

This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.

Here is a table of the change in payroll employment on an annual basis (before benchmark revisions - the revision through March 2012 will be released next month and will show more jobs added based on the preliminary estimate):

Annual Change Payroll Employment (000s)
	Private	Public	Total
2006	1,859	209	2,068
2007	812	288	1,100
2008	-3,782	179	-3,603
2009	-4,984	-76	-5,060
2010	1,248	-221	1,027
2011	2,105	-265	1,840
2012	1,903	-68	1,835

Employment growth in 2012 was mostly in line with expectations.  A little good news - it appears we are near the end of the state and local government layoffs, but the Federal government layoffs are ongoing. Look at the table - four consecutive years of public sector job losses is unprecedented since the Depression.

All Employment Graphs
• U.S. Light Vehicle Sales at 15.3 million annual rate in December

Based on an estimate from WardsAuto, light vehicle sales were at a 15.31 million SAAR in December. That is up 13% from December 2011, and down 1% from the sales rate last month.

This was above the consensus forecast of 15.1 million SAAR (seasonally adjusted annual rate). Note: Some of the increase in November was a bounce back from Hurricane Sandy that negatively impacted sales at the end of October, and sales might have been boosted slightly in December from some storm related bounce back.

Sales were up over 13% in 2012, and auto sales have been a key contributor to the economy over the last three years.  Sales will probably increase in 2013, but not at a double digit rate.

• ISM Manufacturing index increased in December to 50.7

The ISM manufacturing index indicated expansion in December. PMI was at 50.7% in December, up from 49.5% in November. The employment index was at 52.7%, up from 48.4%, and the new orders index was at 50.3%, unchanged from November.

Here is a long term graph of the ISM manufacturing index.

This was slightly above expectations of 50.5% and suggests manufacturing expanded in December.

• ISM Non-Manufacturing Index increases in December

The December ISM Non-manufacturing index was at 56.1%, up from 54.7% in November. The employment index increased in December to 56.3%, up sharply from 50.3% in November. Note: Above 50 indicates expansion, below 50 contraction.


This graph shows the ISM non-manufacturing (Service) index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was above the consensus forecast of 54.5% and indicates faster expansion in December than in November. The internals were strong with both the employment index and new order index up.

• Construction Spending declined in November

The Census Bureau reported that overall construction spending decreased in November:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during November 2012 was estimated at a seasonally adjusted annual rate of $866.0 billion, 0.3 percent below the revised October estimate of $868.2 billion. The November figure is 7.7 percent above the November 2011 estimate of $804.0 billion.

In November 2012, private residential construction spending was the largest category for the first time since 2007 - but spending is still very low (at 1998 levels not adjusted for inflation). Note: Residential construction is usually the largest category for construction spending, but there was a huge collapse in spending following the housing bubble (as expected).

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending is 56% below the peak in early 2006, and up 33% from the post-bubble low. Non-residential spending is 29% below the peak in January 2008, and up about 30% from the recent low.

Public construction spending is now 15% below the peak in March 2009 and just above the post-bubble low.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is now up 19%. Non-residential spending is up 8% year-over-year mostly due to energy spending (power and electric). Public spending is down 3% year-over-year.

All Housing Investment and Construction Graphs
• Weekly Initial Unemployment Claims increase to 372,000

The DOL reports:

In the week ending December 29, the advance figure for seasonally adjusted initial claims was 372,000, an increase of 10,000 from the previous week's revised figure of 362,000.

Weekly claims were above the 363,000 consensus forecast.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 360,000.

Weekly claims are very volatile during the holiday season, but the 4-week average finished 2012 near the low for the year.

All current Employment Graphs

by Calculated Risk on 1/05/2013 08:06:00 AM

Note: I'll post a summary for last week later today.

This will be a light week for economic data. The key report for this week will be the November trade balance report on Friday.

Also Reis will release their Q4 Office, Mall and Apartment vacancy rate surveys this week. Last quarter Reis reported falling vacancy rates for apartments, malls, and offices.

----- Monday, Jan 7th -----
Early: Reis Q4 2012 Office survey of rents and vacancy rates.

----- Tuesday, Jan 8th -----
Early: Reis Q4 2012 Apartment survey of rents and vacancy rates.

7:30 AM ET: NFIB Small Business Optimism Index for December. The consensus is for an increase to 87.9 from 87.5 in November.

3:00 PM: Consumer Credit for November from the Federal Reserve. The consensus is for credit to increase $13.2 billion in November.

----- Wednesday, Jan 9th -----
Early: Reis Q4 2012 Mall Survey of rents and vacancy rates.

7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

----- Thursday, Jan 10th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 362 thousand from 372 thousand last week.

10:00 AM: Job Openings and Labor Turnover Survey for November from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in October to 3.675 million, up from 3.547 million in September. The number of job openings (yellow) has generally been trending up, and openings are up about 8% year-over-year compared to October 2011.

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for November. The consensus is for a 0.3% increase in inventories.

----- Friday, Jan 11th -----
8:30 AM: Trade Balance report for November from the Census Bureau.

Both exports and imports decreased in October. US trade has slowed recently.

The consensus is for the U.S. trade deficit to decrease to $41.1 billion in November from $42.2 billion in October. Export activity to Europe will be closely watched due to economic weakness. Note: the strike at the ports of Long Beach and Los Angeles started in late November and impacted this report.

8:30 AM: Import and Export Prices for December. The consensus is a 0.1% increase in import prices.

by Calculated Risk on 1/04/2013 09:22:00 PM

Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The number of unofficial problem banks grew steadily and peaked at 1,002 institutions on June 10, 2011. The list has been declining since then.

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Jan 4, 2012.

Changes and comments from surferdude808:

Quiet start to the new year for the Unofficial Problem Bank List as there were only four removals this week. The removals push the list count down to 834 institutions with assets of $311.6 billion. A year ago, the list held 970 institutions with assets of $391.2 billion.

Actions were terminated against CommerceWest Bank, N.A., Irvine, CA ($340 million) and Farmers State Bank, Victor, MT ($315 million). The Savannah Bank, National Association, Savannah, GA ($672 million) and Bryan Bank & Trust, Richmond Hill, GA merged into SCBT, Columbia, SC during December 2012. Next week will likely be as quiet; however, the FDIC may have a pent-up closing or two that have been on ice through the holidays they need to get done.

Earlier on employment:
• December Employment Report: 155,000 Jobs, 7.8% Unemployment Rate
• Employment Report Comments and more Graphs
• Graphs for Duration of Unemployment, Unemployment by Education and Diffusion Indexes
• Employment graph gallery

by Calculated Risk on 1/04/2013 06:20:00 PM

From the Association of American Railroads (AAR): AAR Reports Mixed Annual and Monthly Traffic for December

The Association of American Railroads (AAR) today reported mixed 2012 rail traffic compared with 2011. U.S. rail intermodal volume totaled 12.3 million containers and trailers in 2012, up 3.2 percent or 374,918 units, over 2011. Carloads totaled 14.7 million in 2012, down 3.1 percent or 476,322 carloads, from 2011. Intermodal volume in 2012 was the second highest on record, down 0.1 percent or 14,885 containers and trailers, from the record high totals of 2006.
...
“Coal and grain typically account for around half of U.S. rail carloads, so when they’re down, chances are good that overall rail carloads are down too, as we saw in 2012,” said AAR Senior Vice President John T. Gray. “That said, a number of key rail carload categories showed solid improvement in 2012, including categories like autos and lumber that are most highly correlated with economic growth. Meanwhile, intermodal just missed setting a new volume record in 2012.”
emphasis added

Click on graph for larger image.

This graph shows U.S. average weekly rail carloads (NSA).

U.S. railroads originated 1,086,990 carloads in December 2012, down 4.2% (48,071 carloads) from December 2011 and an average of 271,748 carloads per week. Except for a tiny increase in January, year-over-year total U.S. rail carloads fell each month in 2012 compared with the same month in 2011 ...

In December 2012, as in every prior month in 2012, year-over-year U.S. rail carloads would have increased if not for a decline in coal carloadings. Coal carloads totaled 446,233 in December 2012, down 13.3% (68,372 carloads) from December 2011.

Grain carloads totaled 72,422 in December 2012, down 13.9% (11,708 carloads) from December 2011. December 2012’s average weekly grain carloads of 18,106 were the lowest for any December on record.
...
Other commodities showing carload increases on U.S. railroads in December 2012 compared with December 2011 include motor vehicles and parts (up 7,252 carloads, or 13.9%) and crushed stone, gravel, and sand (up 5,419 carloads, or 9.1%. Carloads of stone, clay and glass products were up 1,902, or 7.8%, in December 2012, while carloads of lumber and wood products were 1,673, or 16.3%, higher for the month.

Note that building related commodities were up.

The second graph is for intermodal traffic (using intermodal or shipping containers):

Graphs reprinted with permission.

Intermodal traffic is near peak levels (black line).

U.S. rail intermodal traffic totaled 888,002 containers and trailers in December 2012, up 1.7% (14,690 intermodal units) over December 2011 and an average of 222,001 per week ... For all of 2012, U.S. rail intermodal volume totaled 12,267,336 containers and trailers, up 3.2% (374,918 units) over 2011 and just 0.1% (14,885 units) off 2006’s record. A new record almost certainly would have been set in 2012 if not for the strike by harbor clerks at the Ports of Los Angeles and Long Beach beginning in late November, and/or Hurricane Sandy, which severely disrupted rail and port operations on the East Coast beginning in late October.

Intermodal will probably set a new record in 2013.

Earlier on employment:
• December Employment Report: 155,000 Jobs, 7.8% Unemployment Rate
• Employment Report Comments and more Graphs
• Graphs for Duration of Unemployment, Unemployment by Education and Diffusion Indexes
• Employment graph gallery

by Calculated Risk on 1/04/2013 02:31:00 PM

Here are the earlier employment posts (with graphs):

• December Employment Report: 155,000 Jobs, 7.8% Unemployment Rate
• Employment Report Comments and more Graphs
• Employment graph gallery


And a few more graphs ...

Duration of Unemployment
This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.

The general trend is down for all categories, but only the less than 5 weeks is back to normal levels.

The the long term unemployed is at 3.1% of the labor force - and the number (and percent) of long term unemployed remains a serious problem.

Unemployment by Education
This graph shows the unemployment rate by four levels of education (all groups are 25 years and older).

Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - and it appears all four groups are generally trending down.

Although education matters for the unemployment rate, it doesn't appear to matter as far as finding new employment (all four categories are only gradually declining).

Note: This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed".

Diffusion Indexes
This is a little more technical. The BLS diffusion index for total private employment was at 63.2 in December, up from 56.6 in November. For manufacturing, the diffusion index increased to 59.3, up from 51.2 in November.

Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS. From the BLS:

Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.

Even though the headline number was similar for November and December, it appears job growth was spread across more industries in December, and that is good news.

by Calculated Risk on 1/04/2013 11:52:00 AM

Here is a table of the change in payroll employment on an annual basis (before benchmark revisions - the revision through March 2012 will be released next month and will show more jobs added based on the preliminary estimate):

Annual Change Payroll Employment (000s)
	Private	Public	Total
2006	1,859	209	2,068
2007	812	288	1,100
2008	-3,782	179	-3,603
2009	-4,984	-76	-5,060
2010	1,248	-221	1,027
2011	2,105	-265	1,840
2012	1,903	-68	1,835

Employment growth in 2012 was mostly in line with expectations.  A little good news - it appears we are near the end of the state and local government layoffs (see last graph), but the Federal government layoffs are ongoing. Look at the table - four consecutive years of public sector job losses is unprecedented since the Depression.

The first graph below shows the employment-population ratio for the 25 to 54 age group. This has been moving sideways lately, and that shows the labor market is still weak. Also seasonal retail hiring slowed sharply in December (3rd graph) - but overall seasonal hiring suggests a decent holiday retail season.

Hopefully employment growth will pick up some in 2013, although austerity probably means another year of sluggish growth. Here are a several more graphs...

Employment-Population Ratio, 25 to 54 years old

Click on graph for larger image.

Since the participation rate has declined recently due to cyclical (recession) and demographic (aging population) reasons, an important graph is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the employment-population ratio for this group was trending up as women joined the labor force. The ratio has been mostly moving sideways since the early '90s, with ups and downs related to the business cycle.

This ratio should probably move close to 80% as the economy recovers. The ratio increased in December to 75.9% from 75.7% in November. This has generally been trending up - although the improvement stalled in 2012 - and the ratio is still very low.

Percent Job Losses During Recessions


This graph shows the job losses from the start of the employment recession, in percentage terms - this time aligned at maximum job losses.

In the earlier post, the graph showed the job losses aligned at the start of the employment recession.

This financial crisis recession was much deeper than other post WWII recessions, and the recovery has been slower (the recovery from the 2001 recession was slow too). However, if we compare to other financial crisis recoveries, this recovery has actually been better than most.

Seasonal Retail Hiring

According to the BLS employment report, retailers hired seasonal workers at a slow pace in December.

Typically retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year.

This really shows the collapse in retail hiring in 2008. Since then seasonal hiring has increased back close to more normal levels. Note: I expect the long term trend will be down with more and more internet holiday shopping.

Retailers hired 88.3 thousand workers (NSA) net in December. The combined level for October, November is the highest since 2006. Note: this is NSA (Not Seasonally Adjusted).

This suggests retailers were initially optimistic about the holiday season, but sales might have slowed in December. There is a decent correlation between retail hiring and retail sales, see: Retail: Seasonal Hiring vs. Retail Sales, and the retail season was probably decent.

Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 7.9 million, changed little in December. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of part time workers declined in December to 7.92 million from 8.14 million in November.

These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 14.4% in December.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 4.77 million workers who have been unemployed for more than 26 weeks and still want a job. This was down slightly from 4.78 million in November, and is at the lowest level since June 2009. This is generally trending down, but is still very high. Long term unemployment remains one of the key labor problems in the US.

State and Local Government

This graph shows total state and government payroll employment since January 2007. State and local governments lost 129,000 jobs in 2009, 262,000 in 2010, and 230,000 in 2011. In 2012, state and local government employment declined by 26,000 jobs.

Note: The dashed line shows an estimate including the benchmark revision.

It appears most of the state and local government layoffs are over, however the Federal government layoffs are ongoing. Overall government employment has seen an unprecedented decline over the last 3+ years (not seen since the Depression).

All Employment Graphs

by Calculated Risk on 1/04/2013 10:00:00 AM

Note: I'll have more on the employment report soon.

The December ISM Non-manufacturing index was at 56.1%, up from 54.7% in November. The employment index increased in December to 56.3%, up sharply from 50.3% in November. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: December 2012 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in December for the 36th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee. "The NMI™ registered 56.1 percent in December, 1.4 percentage points higher than the 54.7 percent registered in November. This indicates continued growth at a slightly faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 60.3 percent, which is 0.9 percentage point lower than the 61.2 percent reported in November, reflecting growth for the 41st consecutive month. The New Orders Index increased by 1.2 percentage points to 59.3 percent. The Employment Index increased by 6 percentage points to 56.3 percent, indicating growth in employment for the fifth consecutive month at a significantly faster rate. The Prices Index decreased 0.4 percentage point to 56.6 percent, indicating prices increased at a slightly slower rate in December when compared to November. According to the NMI™, 13 non-manufacturing industries reported growth in December. Respondents' comments remain mixed and are mostly positive about business conditions and the economy."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was above the consensus forecast of 54.5% and indicates faster expansion in December than in November. The internals were strong with the employment index and new order up.

by Calculated Risk on 1/04/2013 08:30:00 AM

From the BLS:

Nonfarm payroll employment rose by 155,000 in December, and the unemployment rate was unchanged at 7.8 percent, the U.S. Bureau of Labor Statistics reported today.
...
The change in total nonfarm payroll employment for October was revised from +138,000 to +137,000, and the change for November was revised from +146,000 to +161,000.

Click on graph for larger image.

The headline number was at expectations of 157,000.  Employment for October was revised down slightly, and November payroll growth was revised up.

The second graph shows the unemployment rate.

The unemployment rate was unchanged at 7.8% (The November unemployment rate was revised up from 7.7% as part of the annual household report revision). 

The unemployment rate is from the household report and the household report showed only a small increase in employment.


The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate was unchanged at 63.6% in December (blue line. This is the percentage of the working age population in the labor force.

The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although a significant portion of the recent decline is due to demographics.


The Employment-Population ratio decreased to 58.6% in December (black line). I'll post the 25 to 54 age group employment-population ratio graph later.


The fourth graph shows the job losses from the start of the employment recession, in percentage terms, compared to previous post WWII recessions. The dotted line is ex-Census hiring.

This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.

This was another sluggish growth employment report. I'll have much more later ...

by Calculated Risk on 1/03/2013 09:20:00 PM

The key report of the week will be released Friday morning: the December Employment Report. The consensus (see below) increased today based on the better than expected ADP employment report. Here is a summary of recent data:

• The ADP employment report showed an increase of 215,000 private sector payroll jobs in December. This was above expectations. Historically the ADP report hasn't been very useful in predicting the BLS report for any one month, although the methodology changed three months ago and may be more useful in predicting the BLS report. In general this suggests employment growth was above expectations.

• The ISM manufacturing employment index increased in December to 52.7%, up from 48.4% in November.

• Initial weekly unemployment claims averaged about 362,000 in December. This was the low for the year.  A positive for employment.

For the BLS reference week (includes the 12th of the month), initial claims were at 362,000; the lowest for a reference week this year.

• The small business index from Intuit showed 15,000 payroll jobs added, down from 25,000 in November.

• And on the unemployment rate from Gallup:

Gallup's seasonally unadjusted unemployment rate for the U.S. workforce was 7.7% for the month of December, statistically unchanged from 7.8% at the end of November. Gallup's seasonally adjusted unemployment rate is 7.9%, a 0.4-point decline over November.

Note: Gallup only recently has been providing a seasonally adjusted estimate for the unemployment rate, so use with caution. So far the Gallup numbers haven't been very useful in predicting the BLS unemployment rate, but this does suggest little change in December from 7.7% in November.

This data suggests a stronger employment report for December than for November, and perhaps over 200 thousand jobs added.

Friday economic releases:
• At 8:30 AM, the Employment Report for December will be released. The consensus is for an increase of 157,000 non-farm payroll jobs in December; there were 146,000 jobs added in November. The consensus is for the unemployment rate to increase to 7.8% in December, up from 7.7% in November.

• At 10:00 AM, ISM non-Manufacturing Index for December. The consensus is for a decrease to 54.5 from 54.7 in November. Note: Above 50 indicates expansion, below 50 contraction.

• Also at 10:00 AM, Manufacturers' Shipments, Inventories and Orders (Factory Orders) for November. The consensus is for a 0.3% increase in orders.

• At 3:00 PM, Speech by Fed Vice Chair Janet Yellen, "Systemic Risk", At the American Economic Association/American Finance Association Joint Luncheon, San Diego, California