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Payrolls Grow, Unemployment Drops- Sell The News

This morning’s data on payrolls and unemployment from the Bureau of Labor Statistics was a strong report. The question is whether it is sustainable.

I like to look at the actual data rather than the seasonally adjusted data to get an accurate picture of what’s going on. It’s a choice between real numbers that tell us where we really are and imaginary ones that make it impossible to make accurate comparisons, since they don’t represent the actual number. February is a month where the seasonal adjustments actually result in a gross understatement of job gains. Using the actual number, it’s a very simple matter to compare this month with last month, and then compare the month to month change with past years in order to get a sense of how things are progressing.

The actual unemployment rate fell to 16.7% in February, including marginally attached workers and those working part time but wanting full time work. This is down from 17.3% in January and 17.9 % in February of 2010. The February 2010 decline was just 0.1%. The average February decline for the years 2001-2011, excluding the collapse year of 2009 was 0.3%. This year’s drop of 0.6% is a strong performance.
Chart Extended Unemployment Rate- Click to enlarge

Total employment rises 494,000 month to month according to the household survey. This is a fairly normal seasonal uptick for February. It was 100,000 better than last February’s gain and slightly better than the average February gain of 461,000 since 2001, excluding 2009’s sharp drop.
Total Employment Chart- Household Survey- Click to enlarge

The establishment survey showed a year to year gain approximately 1.25 million. Most of the gain was this month, with a jump of 816,000. The average gain in February for 2001 to 2011, excluding 2009, was 636,000, so again this was a good performance.
Total Employment Chart- Establishment Survey- Click to enlarge

Average weekly hours worked fell to 33.9 from 34.2 month to month, up from 33.6 in 2010 but below 2009’s 34.2. The government has tracked this statistic since March 2006. It showed a gain in February 2007, 2008, and 2009, but a decline last year, and a bigger decline this year.
Average Hours Worked Chart- Click to enlarge

Off the 494,000 gain in total employment indicated by the household survey, just 358,000 were full time jobs. This is better than last year when the February gain was 323,000, but not as good as the last non recessionary year, 2006, when the gain was 428,000. The average gain from 2001 to 2011, excluding 2009 when the economy collapsed, was 281,000. All in all, this is a positive number.
Full Time Jobs Chart- Click to enlarge
So we’re having a party on borrowed, printed money. If this is what $100,000 billion a month in government deficit spending and another $100 billion a month in Fed printing will buy you, the question becomes what happens when they pull the punchbowl. The real test of sustainability of these gains will come when QE2 ends and government stimulus programs wind down over the next few months.

I think that this is as good as it gets. This presents a golden opportunity to get out of the market when the getting is good. Apparently some savvy traders have already made that decision this morning.

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6 Comments

  1. ter

    Thanks for the honestly reported good news. Improvement also attributable to the perpetually propagandized public swallowing the pigswill. One month does not a summer of content make. This time, at least,March hasn’t come in lyin’.

  2. Frothy Conundrum

    Lee, this report was good only in the context of just the past three years. In the context of a) the size of the population/labor force, b) the # of jobs lost in 2007-09 and c) the business cycle considered to have turned up a good 18 months ago, it was a pretty weak report. The Birth/Death fluff factor was +112K, which translates into an add of about 75K to the final number post statistical massaging, so the net after ‘assumed’ new jobs was about 115K. We ought to be getting + 350K(and for the past 8-10 months)every month, without any B/D or other finagling, in the context of the three points above.

  3. Lee Adler

    People are misreading my intent. Please read the two concluding paragraphs and then go back and read the data portion.

    These are apples to apples comparisons. They are what they are. I’m just reporting the facts on the ground. This month was good compared to last year and compared to the average of the last decade. The withholding tax data corroborates the validity of the data.

    That being said, it does not change the bearish conclusion. The factors that drove the improvement are temporary, and were at their strongest in February. From here they recede. See Treasuries and Stocks Face Perfect Storm https://wallstreetexaminer.com/2011/03/04/treasuries-and-stocks-face-perfect-storm/

  4. Lee Adler

    Also the household survey does not use a birth death adjustment. In the establishment survey the birth-death adjustments are now updated quarterly so the degree of error in the estimate is reduced. Unless there’s a substantial difference between the B/D for this February versus last Fed, the comparison is valid.

  5. Frothy Conundrum

    Lee, I don’t want to get in a data battle, and I believe we’re in general agreement but…
    -2009 happened, and it should be included in all calculations; it’s part of our aggregate economic experience. Not doing so is like the Fed’s ‘core’ inflation, or ‘operating’ earnings.
    -How did this February’s gain compare, in % terms, to February 1997? 1984? 1965? 1953? I believe that economic comparisons should stretch at least to the end of WW2, not only because that provides a greater data sample but because my bigger view is that a multigenerational credit cycle from that time has ended/is ending, and current data/results ought to be viewed in that kind of full context(’09 reflects this ending, and also has less impact in 65 years of data than 10). Using only the post-2000 data adds only what was-until now-the worst employment environment in a business upcycle since WW2 to the data set. The current employment environment is clearly the worst in a business upcycle since WW2-and is probably worse than any period since WW2 except 2008-10, and parts of 1974-5 and 1981-2, i.e., it’s worse than most of the recessionary periods of the past 65 years. February’s report further confirms that to me: it was ‘good’ in context of the past 3 years, ‘ok’ in the context of the past decade and ‘sucks sweaty mule ass’ in the context of the past 65 years(or essentially the period for which employment data actually exists)-and especially when we add to the context the gimongous stimulus you noted in the article and the three points I noted above. The B/D model assumed small businesses created jobs in every month of 2008 and 2009, except the once a year clean up in January. That all by itself eliminates any utility the model might have had; it’s as credible an assumption as the pre-Columbian assumption that Earth is flat and shreds any validity of the model.
    If the MSM reported anything close to what you and I have written here, I wouldn’t be compelled to go on these rants, but the dumbasses/whores are spinning this report as ‘good’ in absolute terms and you and I know that’s bullshit; its(MSM, not us here or similar) also insulting, especially to those without a job.

  6. Lee Adler

    If I included 2009 in the comparisons then this month’s performance would have been even stronger by comparison. I excluded the negative outlier, which made the comparison tougher. This month was still better than that average. It was a solid performance, and it is corroborated by the tax withholding. However, it leads to a bearish conclusion because it required a half trillion in stimulus in just that one month. What happens when the extra stimulus is removed?

    In past articles I have repeatedly demonstrated how weak this recovery is. The charts in this report also clearly reflect that.

    So we’re in agreement.

    At least the BLS now does the B/D adjustment rebenchmarking to actual numbers quarterly. That’s a big improvement.

    Next time when I write something like this I will draw a picture of my tongue sticking through my cheek with regard to certain words. As it stands, I have rewritten the headline to make the point of the article clearer to those who don’t read the article.

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