May Payrolls sucks

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The May non-farm payrolls report was +69k (mkt + 150k), defying the balance of the partial indicators, which had suggested a number ~200k. The US establishment survey is considered to be well measured – once the near term revisions come in. The revision to March lowered the estimate by 11k (154k v. 143k) and the revisions to April lowered the estimate 38k to 77k.

Along with the headline rate, the BLS reports that the average work-week declined by 0.1hr MoM, while the manu workweek (typically the most cyclical) fell 0.3hrs to 40.5hrs (still healthy). Average hourly earnings for all employees on private nonfarm payrolls edged up by 2 cents to $23.41. Over the past 12 months, average hourly earnings have increased by 1.7 percent. In May, average hourly earnings of private-sector production and nonsupervisory employees edged down by 1 cent to $19.70.

Notwithstanding the higher unemployment rate (+10bps to 8.2%) the household survey suggests 422k new jobs (though a 642k increase in the labour force). Job losers increased 137k to 6989k, and job leavers were -106k to 891k.

Among the leaders, construction was -28k and temporary help was +2.5k.

Over-all, this is a weak report. I expect that the Fed will take out some insurance at their 20 June meeting – likely to be an extension of twist, or some MBS buying.


      1. Its quite telling isn’t it. Although the nz household survey is also qrterly. But I think Australia is unusual compared with other countries. Canada has one and I think the uk has one as well. They have the mechanism there the avg weekly earnings survey has to work out employment…but the methodology is probably more focused on earnings. I would have thought an employment establishment survey would have been more important. What do you reckon?

        1. i would like one a lot, but mostly because it’d stop a lot of silly story-telling that folks seem unable to resist as a substitute for facts. Us sell-siders …

          For policy making, i think the weight of evidence (even where there are establishment surveys) suggests that the unemployment rate is the best measure of overall performance, and best leading indicator of future inflation. Given finite capital I’d take a larger sample in the household survey (as so less month-to-month volatility) over an establishment survey – but of course i’d like both!

  1. Last time The Big Ben talked about the need for more QE, it was justified under the social costs of long-term unemployment. Over 26 weeks duration in particular is going sharply up- I think this is a large burden on Bernanke’s mind- the true social cost of sitting back.

    “Recent improvements are encouraging, but, as I have noted, in an absolute sense, the job market is still far from normal by many measures, and millions of families continue to suffer the day-to-day hardships associated with not being able to find suitable employment. Although most spells of unemployment are disruptive or costly, the persistently high rate of long-term unemployment we have seen over the past three years or so is especially concerning. “

  2. “I also discussed long-term unemployment today, arguing that cyclical rather than structural factors are likely the primary source of its substantial increase during the recession. If this assessment is correct, then accommodative policies to support the economic recovery will help address this problem as well. We must watch long-term unemployment especially carefully, however. Even if the primary cause of high long-term unemployment is insufficient aggregate demand, if progress in reducing unemployment is too slow, the long-term unemployed will see their skills and labor force attachment atrophy further, possibly converting a cyclical problem into a structural one. “

    1. there is a meme out there saying that the Fed doesn’t need to do QE3 because the market has already done it for them – see this for example … what do you think about this argument?
      while it seems likely that capital flows out of Europe are indeed pushing capital into USTs and hence lowering their yields, i also think that there’s an expectation that the Fed will ease built into the market, and that it’s up to the Fed to validate that expectation.

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