The Ugly Employment Report – What Happened?
December 3, 2010 12:59 pm
The report from the BLS this morning threw some cold water on the euphoria of investors. Most were looking for this as a turning point in the jobs markets, especially looking at the recent trends. There were calls for the unemployment rate to drop to 9.4% and upwards of 200,000 jobs added. Joseph LaVorgna, chief economist at Deutsche Bank Securities is one of the more bullish of the bunch over the past several months. What he is seeing different from the rest is anyone’s guess at this point.
On the other hand, TrimTabs is trying to show that there may have been some seasonality involved in the report. While economists should have taken that into consideration, here is what may have occurred:
TrimTabs’ income tax withholding based employment model showed that November payroll employment grew 117,000. Meanwhile the Bureau of Labor Statistics (BLS) reported the U.S. economy gained an anemic 39,000 jobs.
We suspect the BLS estimate is too low because the BLS’ seasonal adjustments are huge this time of year. The November adjustment was nearly 1.3 million jobs to account for large seasonal changes in retail, local public education, construction, arts and entertainment, and temporary employment services. The October adjustment was nearly 1.0 million jobs. We believe large seasonal adjustments dwarf the ability to accurately measure small changes in employment.
In addition, anecdotal evidence suggests that retailers hired their temporary holiday workforce earlier this year than last due to the large number of pre-holiday sales. Retailers across the country launched early holiday sales in an effort to lure consumers into stores. That means employment growth would be higher than normal in October, followed by more subdued employment gains in November. When we compare employment gains over the past two months, TrimTabs results are nearly identical to the BLS results. TrimTabs employment growth for October and November was 212,000 jobs, while the BLS revised total was 211,000 jobs.
The birth/death adjustment was statistically insignificant this month, so did not contribute the usual uncertainty surrounding this mysterious adjustment.
This month’s private sector job growth occurred was driven by:
· Shipping +11,200 jobs
· Temporary employment +39,500 jobs
· Health care services +19,200 jobs
· Accommodation and Food Services +11,200 jobs
· Federal government +4,800 jobs
Meanwhile, the goods producing sector shed 15,000 jobs, and local governments dropped 14,000 jobs as state and local governments continue to struggle with large budget gaps.
Below is our full employment series.