Friday, September 7, 2012

August Employment Missed Expectations

The unemployment data for August, which missed expectations as we had estimated, is not very encouraging, unless one is still on that QE3 bandwagon.  However, as many politicians and optimists might say - at least jobs were added.  With such a disappointment in jobs numbers, the market opened slightly up.  The S&P 500 is up more than 3.5 points.  VIX is down another 1%.  And gold futures hit $1730 with hopes for a QE.  It used to be that the stock market was a leading indicator of the economy.  These days (starting a couple of years ago), the stock market is a leading beggar for more money printing by the Fed and other central banks around the world; all of this while the economy barely grows.
  • August NFP came in at 96K, below our estimate and the overall consensus.  We note that we expected 110K, compared to the Street's more optimistic estimate of 125K.  The official unemployment rate fell to 8.1% from July's 8.3%.
  • Further push for a QE3 was brought on by downward revision of the July NFP; revised lower by 41K.  Private NFP for July was lowered by 20K.
  • With a net loss of 7K in government jobs, the private NFP figure was 103K, significantly below what the ADP data was hinting yesterday.
  • August hourly earnings actually declined by 1c!  This is alarming given rising prices.  In addition, it again may question the reality and stability of what many refer to as the housing recovery.
  • Average weekly hours worked stayed at 34.4.  We note that the July figure was revised down by 0.1 hours.
  • U-6 unemployment rate dipped down to 14.7% from 15.0%, which is somewhat positive.
  • Labor force participation rate declined another 20bps from previous month to 63.5; that's down from last year's 64.1. 
  • Number of people employed declined 119K from July; up 2.34MM from last year.  We note that the civilian labor force shrunk by another 368K from July.
  • The long-term unemployed (27+ weeks) figure declined by 152K from July.  It appears that reality has caught on to manufacturing, as the sector lost 15K jobs in August compared with July.  Also, the initial net addition of 25K manufacturing jobs for July was lowered to 16K.  We did mention last month that the July manufacturing jobs number was suspect.
  • 119K jobs were added in the private space, lower than the 139K boost it got in July.
  • Temporary help in professional and business services dipped 4.9K, which is not a good sign given the accompanying slower rate of growth we are seeing in the NFP (incl. private NFP).  we also note that July's 14.1K net adds in temporary help services was revised down to 6.7K.  In addition, the dip in temp jobs brought down the increase in overall professional and business services to only 28K, compared with the 40K+ we had seen the last few months.
  • The seasonally strong leisure and hospitality space added another 34K jobs in August, after adding 28K in July (revised up from 27K).

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