This mornings NFP (non-farm payroll) unemployment numbers were expected to be positive. Consensus was that the report would show an increase of 10,000 jobs. Tyler Durden reports that Stifel Nicholas argued there was a "strong chance of a +100k" increase that could even be as high as +316,000 due to seasonal factors. It is surprising therefore that this morning's NFP number came in at -85,000.
Recent unemployment numbers underscore the nature of the current recovery. Employment in goods producing industries has continued to decline, though the rate of decline itself has slowed. This trend does not hold in the financial industry, where employment has picked up recently. This trend mirrors the way asset prices have rallied while overall economic performance has been muted.
Stifel Nicholas' argument for a high NFP included a section on why and how the Obama administration will be spinning jobs data:
For the initial and continuing claims data the seasonal adjustment factors are fairly rigid and published by the Department of Labor well in advance. The non-farm payroll adjustments used to be similar in that regard, but since 2003 that has changed. The Bureau of Labor Statistics no longer publishes adjustment factors in advance, and in fact now actually derives them on the fly as the data comes in. As a result it is now much more difficult to predict how seasonal adjustments may skew the non-farm payroll data.While I have no idea how accurate the above statement is (I have no reason to doubt it), the logic on the timing of skewed seasonal adjustments doesn't make sense to me. It seems to me that the Obama administration would want to show lower unemployment numbers now to maintain appetite for stimulus and low rates. Also, since all increases in seasonal adjustments now have to be offset with decreases in seasonal adjustments later it makes sense to show gains in the Spring, when it would have more effect on midterm elections. Showing extra gains in the Spring requires showing extra losses now, so perhaps the recent NFP report is not as bad as it seems.
