Friday, February 1, 2013

Non Farm payrolls come in basically in line at 157 ,000 , Unemployment ticks up to 7.9 percent .... November and December revised upward ( Nov from 161,00 to 247,000 - an increase of 86,000 and Dec from 155 ,000 to 196,000 - an increase of 41,000 ......number of unemployed / long term unemployed / employment - population ratio and labor force participation rate all unchanged month over month.... Overnight news and data from Europe ( note Dutch SNS Bank nationalized ) and Asia

The BLS Jobs Report Covering January 2013: Terrible Month, Great Report

By Hugh, who is a long-time commenter at Naked Capitalism. Originally published at Corrente.
The short form: Yearly revisions increased the number of jobs created in 2012 by 647,000. These revisions make some comparisons difficult between December 2012 and January 2013 and obscure that January is an absolutely dreadful month for jobs and employment in real terms. After Christmas, the economy sheds large numbers of jobs that are not picked back up until later in the spring. The result is that while the adjusted numbers show gains, these numbers mark a trend basically bridging a chasm. The bottom of that chasm is where the economy now is. The number of employed dropped by nearly 1.5 million in the Household survey. The larger business survey documented just over 2.8 million jobs lost in January. These losses resulted in a real unemployment rate of 13.6% (versus a real trend rate of 12.6%) whereas real un- and under employment hit 18.9% (versus 17.4% trend) affecting nearly 31 million Americans. Blue collar workers lost ground in January in wages and hours, and in 2012 they also lost ground to inflation, low as it was. Average earnings for all private employees in 2012 increased about 2%, but this was probably all or nearly all wiped out by inflation. The CPI will come out later in the month. With that to the report.
The January jobs report is perhaps the most complicated of the year. There are year end revisions to both of the report’s two surveys: the business or Establishment survey covering jobs and the Household survey covering employment (people). The business or jobs survey updates its numbers based on a much more complete tally for the month of March using unemployment insurance records. Tables for both seasonally adjusted and unadjusted data are revised. Revisions for unadjusted data go back to April 2011 and adjusted to January 2008. Based on changes in the March benchmark data, seasonally adjusted total nonfarm jobs in 2012 (the official jobs number) increased by 647,000 more than was previously reported: 134.021 million > 134.668 million
In the Household or people survey, revisions come from updates in Census data. However, unlike the business survey, these revisions are not applied retroactively. In other words, data for each year is treated as a done deal and all revisions between years are loaded into the January numbers. As a result, direct comparisons from the tables between Decembers and Januarys are not possible. However, the BLS does provide a supplemental table showing some changes taking these revisions into account for seasonally adjusted data only, and I will make use of those.
Turning to this month’s headline numbers, the official U-3 unemployment rate was reported as “essentially unchanged” at 7.9% although it edged up a tenth of a percent in January. The seasonally adjusted official number of jobs increased by 157,000. In the regular two month revisions (yes, we still have those),

December increased 41,000: 155,000 > 196,000
November increased a further 86,000: 146,000 > 161,000 > 247,000 or a 69% increase over the initial estimate.
Month to month the potential labor force as represented by the Civilian Noninstitutional Population over 16 (NIP) increased 175,000 to 244.663 million. This NIP has built into it a yearly revision increase of 138,000. The employment-population remained unchanged at 58.6% with and without revision. So a rough estimate of the increase in jobs .586(175,000) would be 103,000 jobs. Per the official seasonally adjusted number 157,000, the economy did better than this. However, as I have pointed out many times, the official number is not a real number, it is a point on a trend line. In January especially, as we shall shortly see, the difference between the trend and what actually happened in the economy can be enormous. The trend smooths over what is basically a chasm existing between large after Christmas job and employment losses and the spring seasonal rebound.
The current labor force seasonally adjusted increased month to month just 7,000 to 155.654 million. The unadjusted number was 154.794 million with no direct comparison to December possible with the data in the tables.
Seasonally adjusted those employed dropped month to month 110,000 to 143.322 million. Unadjusted, the number was 141.614 million. While no direct comparison can be made with December, it is important to realize that this is 1.446 million less than December’s 143.060 million. What is being masked here by the year end revisions is a huge seasonal drop in employment after the end of the Christmas shopping season. In real (seasonally unadjusted) terms, January is a terrible month, always.
So while the employment-population ratio seasonally adjusted remained unchanged. Unadjusted it dropped a staggering 0.6%. Remember each tenth of a percent is equivalent to around 245,000 people.
We see a similar effect in the unemployment numbers. Seasonally adjusted unemployment rose month to month by 117,000 to 12.332 million. Unadjusted, it increased 1.337 million to 13.181 million.
The unemployment rate seasonally adjusted, that is in official terms, increased a tenth of a percent to 7.9%. Unadjusted, it spiked from 7.6% to 8.5%.
The BLS broader measure of un- and under employment, the U-6, shows a similar discrepancy between the adjusted and unadjusted numbers. Adjusted, it remained unchanged at 14.4%. Unadjusted, it increased a whole percent to 15.4%

The seasonally adjusted U-6 un- and under employed represent the 12.332 million in the U-3 official unemployment rate, 7.973 million involuntary part timers, and 2.443 million marginally attached (those who have looked for work in the last year but not in the last 4 weeks before the survey) or 22.748 million total.
The BLS has a restrictive, though internationally recognized, definition of unemployment: without a job but have looked for one in the last 4 weeks. The marginally attached are not counted as part of the labor force and their use in the U-6 is an indication that this is what the BLS considers its functional undercount to be.
The BLS also has a more extended category: Not in Labor Force, Want a Job Now (seasonally unadjusted). This was up 249,000 in January to 6.781 million and could also be taken as a measure of its undercount. The problem which I state each month at this point in my analysis is that this number does not reflect very well actual changes in the economy. So I have developed an alternative to it. In my alternate calculation, I compare the current labor force to where we would expect it to be in a solid economic expansion: labor participation rate of 67% (boomers retiring so far has had little effect upon this figure). The difference between these two is my measure of the undercount. In addition, beginning with this post, I will calculate both trend (seasonally adjusted) and current (seasonally unadjusted) figures for the undercount and numbers derived from it.
.67(244.663 million) = 163.924 million (where the labor force should be)
Trend Undercount:
163.924 million — 155.654 million = 8.270 million
Current Undercount:
163.924 million — 154.794 million = 9.130 million
These are my estimates for the capture of the undercount, those who do not have jobs but would work if jobs were available to them.
With these numbers we can now calculate where the U-3 unemployment and U-6 un- and under employment (disemployment) really are, that is real unemployment and real disemployment and their associated rates both in terms of their trend and where they are now.
Real Trend Unemployment (that is seasonally adjusted):
12.332 million (U-3 unemployment) + 8.270 million (undercount) = 20.602 million
20.602 million / 163.924 million = 12.6%

Real Unemployment Now (i.e. seasonally unadjusted):
13.181 million (U-3 unemployment) + 9.130 million (undercount) = 22.311 million
22.311 million / 163.924 million = 13.6%
Real Trend Disemployment:
Real Trend Unemployment + involuntary part time workers seasonally adjusted = 20.602 million + 7.973 million = 28.575 million
28.575 million / 163.924 = 17.4%
Real Disemployment Now:
Real Trend Unemployment + involuntary part time workers seasonally unadjusted = 22.311 million + 8.628 million = 30.939 million
28.575 million / 163.924 = 18.9%
Looked at this way real unemployment (SA, seasonally adjusted) is 4.7% higher than the official (trend) rate while the real (NSA, unadjusted) rate for where we actually were in January 2013 is 5.1% higher. As I have often said, one of the easiest ways for officialdom to deal with unemployment is to define away as much of it as possible. Out of sight, out of mind, therefore not their responsibility.
The long term unemployed, those unemployed by the BLS definition, for 6 months or more was 4.708 million in January. They numbered 5.522 million a year ago. This is a decline of 514,000 but it is unclear where they went: into employment or out of the labor force altogether.
By race, unemployment among whites was little changed at 7.0%. Unemployment among African Americans declined slightly to 13.8%. The rough rule that unemployment among African Americans is twice that among whites continues to hold.
In the business survey, jobs (SA) increased 157,000 to 134.825 million. This represented 166,000 jobs created in the private sector and 9,000 job losses in government. Not seasonally adjusted (NSA), that is in the here and now, the economy lost 2.840 million jobs, dropping to 132.705 million, with 2.345 million lost in the private sector and 495,000 in government (almost entirely at the state and local levels). Among the big losers in the private sector was 90,000 in manufacturing, 272,000 in construction, and 1.974 million in the private services sector, including 592,000 in retail trade, 410,000 in professional and business services and 334,000 in leisure and hospitality.
Contrast this with the seasonally adjusted (SA) figures of gains of 33,000 in retail trade, 28,000 in construction, and little to no changes in manufacturing, professional and business services, and leisure and hospitality.

Average weekly hours for all private non-farm employees remained unchanged at 34.4 hours. Their average hourly earnings were $23.78, an increase of 4 cents, and their average weekly earnings were $818.03, an increase of $1.37 month over month, and 1.9% increase from last January.
Average weekly hours for production and nonsupervisory (blue collar) employees decreased a tenth of an hour to 33.6 hours. Their average hourly earnings were $19.97, an increase of 5 cents, and their average weekly earnings were $670.99, a decrease of 31 cents month over month, and a 1.2% increase over January 2012.
Household data (Employment/unemployment)
Statistical significance: +/ – 400,000
The A tables:
A 1 for most information and categories
A 2 Unemployment by race
A 8 Part time workers
A 12 Duration of unemployment
A 15 U 6 un- and under employment
A 16 Persons not in labor force
Establishment date (jobs)
Statistical significance: +/ – 100,000
The B tables:
B 1 Total jobs and jobs by industry/type
B 2 Weekly hours, all employees
B 3 Hourly and weekly earnings, all employees
B 6 Weekly hours, blue collar
B 7 Hourly and weekly earnings, blue collar


157,000 Jobs Added In January, Unemployment Rate At 7.9%

Tyler Durden's picture

The goldilocks economy continues as the unemployment rate comes right as expected, or 157,000, a tiny miss to expectations of 165,000, down from the upwardly revised 196,000 (was 155,000 previously), leading to an unemployment rate of 7.9%, higher than the 7.8% expected.
From the Household survey:
The number of unemployed persons, at 12.3 million, was little changed in January. The unemployment rate was 7.9 percent and has been at or near that level since September 2012. (See table A-1.) (See the note and tables B and C for information about annual population adjustments to the household survey estimates.)

Among the major worker groups, the unemployment rates for adult men (7.3 percent), adult women (7.3 percent), teenagers (23.4 percent), whites (7.0 percent), blacks (13.8 percent), and Hispanics (9.7 percent) showed little or no change in January. The jobless rate for Asians was 6.5 percent (not seasonally adjusted), little changed from a year earlier. (See tables A-1, A-2, and A-3.)

In January, the number of long-term unemployed (those jobless for 27 weeks or more) was about unchanged at 4.7 million and accounted for 38.1 percent of the unemployed. (See table A-12.)

Both the employment-population ratio (58.6 percent) and the civilian labor force participation rate (63.6 percent) were
unchanged in January. (See table A-1.)

The number of persons employed part time for economic reasons, at 8.0 million, changed little in January. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. (See table A-8.)
And from the Establishment survey: 
Total nonfarm payroll employment increased by 157,000 in January. In 2012, employment growth averaged 181,000 per month. In January, job gains occurred in retail trade, construction, health care, and wholesale trade, while employment edged down in transportation and warehousing. (See table B-1.)

Employment in retail trade rose by 33,000 in January, compared with an average monthly gain of 20,000 in 2012. Within the industry, job growth continued in January in motor vehicle and parts dealers (+7,000), electronics and appliance stores (+5,000), and clothing stores (+10,000).

In January, employment in construction increased by 28,000. Nearly all of the job growth occurred in specialty trade contractors (+26,000), with the gain about equally split between residential and nonresidential specialty trade contractors. Since reaching a low in January 2011, construction employment has grown by 296,000, with one-third of the gain occurring in the last 4 months. However, the January 2013 level of construction employment remained about 2 million below its previous peak level in April 2006.

Health care continued to add jobs in January (+23,000). Within health care, job growth occurred in ambulatory health care services (+28,000), which includes doctors' offices and outpatient care centers. This gain was partially offset by a loss of 8,000 jobs in nursing and residential care facilities. Over the year, health care employment has increased by 320,000.

Employment increased in wholesale trade (+15,000) in January, with most of the increase occurring in its nondurable goods component (+11,000). Since the recent low point in  May 2010, wholesale trade has added 291,000 jobs.

Mining employment increased (+6,000) over the month; employment in this industry has risen by 23,000 over the past 3 months.

Employment edged down in transportation and warehousing in January (-14,000). Couriers and messengers lost 19,000 jobs over the month, following strong seasonal hiring in November and December. Air transportation employment decreased by 5,000 in January.

Manufacturing employment was essentially unchanged in January and has changed little, on
net, since July 2012.

The labor force participation rate remained the same:

Dutch SNS Bank Fails On Real Estate Losses: First "Too Big To Fail" Nationalization In Five Years

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Earlier today we got one hint that not all is well in the European banking system, as far less than the expected €200 billion was tendered back to the ECB in the second LTRO repayment operation, when just 27 banks paid back some €3.5 billion. Another, perhaps far bigger one, comes courtesy of AAA-rated Netherlands, which just experienced its first bank failure since 2008 following the nationalization of SNS Reall NV, as the previously announced bad loan writedown finally claimed the bank. As a reminder, half a month ago we got news that "SNS Reaal NV (SR), a Dutch bank and insurer struggling to wind down a money-losing real estate lending unit, fell the most in more than two months after a report said it may have to post a 1.8 billion-euro ($2.4 billion) writedown on property-finance loans." Today we got the inevitable conclusion: nationalization, one which will cost taxpayers about $5 billion to avoid contagion to what many see as Europe's "strongest" banking system.

From Bloomberg:
The move, aimed “at stabilizing the SNS Reaal group,” will cost taxpayers 3.7 billion euros ($5 billion), the Dutch Finance Ministry said in a statement today. SNS’s property- finance unit will be separated from the company.

“I scrutinized all alternative solutions involving market parties,” Finance Minister Jeroen Dijsselbloem said. “Yesterday night I found myself compelled to conclude no acceptable total solution was offered. I therefore had to use the instrument of last resort, which is nationalization.”

The lender, which acquired ABN Amro Holding NV’s property- finance unit in 2006, has been hurt by losses on real estate loans that have left it struggling to repay a government bailout before next year’s deadline and bolster capital buffers. The nationalization includes all issued shares, core tier 1 capital securities and subordinated bonds, the ministry said.

SNS shares were suspended in Amsterdam. They last traded yesterday at 84 cents, valuing the company at 242 million euros, and have declined 57 percent in the past year.


The state will inject 2.2 billion euros of capital into SNS Reaal, write down 800 million euros on its earlier aid package and use 700 million euros to put the real estate portfolio at arm’s length.

“Nationalization would safeguard financial stability and prevent serious damage to the economy,” Dijsselbloem said. “I want the private sector to contribute as much as possible.”

SNS Reaal is the smallest of four Dutch banks designated as “systemically important,” or too big to fail, by the Dutch central bank. It had 32.5 billion euros in savings at the end of the third quarter, according to a Nov. 15 presentation. ING, Rabobank Groep and ABN Amro are its three largest competitors.
So if one of the most stable banking systems in Europe is not quite as stable as expected, one can only imagine what is going on in Spain and Italy, and how many hundreds of billions more in taxpayer aid will have to be shelved out once the soaring bad loans in these two countries can no longer be swept under the rug. 


Key Acronyms Of The Overnight Session: PMI, LTRO, USDJPY And EURUSD

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After two consecutive down days in the market, it was time to get real, and like clockwork the dollar and yen devastation started right out of the gate in overnight trading, when first the USDJPY exploded higher, followed promptly by the EURUSD, both of which hit new period highs, of over 92, and just why of 1.37 respectively. And with not one funding currency around to push risk higher, but two, futures have ramped enough to undo all of yesterday's losses and then some. Bad news was either promptly ignored, such as China's official PMI coming in at 50.4, below expectations of the 50.6 print, or offset by conflicting data, with the HSBC China PMI print moments after at 52.3, higher than the 52.0 expected, taking us back to early 2012 when the Chinese PMI was contracting and expending at the same time.

Speaking of PMIs, it was Europe's turn to release its final PMIs, which came in line with expectations, with Spain and Italy posting yet another modest increase, Germany rising from 48.8 to 49.8, and above the expectations of an unchanged number, and the consolidated Eurozone Manufacturing PMI printing at 47.9, up from the previous and expected 47.5: an 11 month high. Then again all these gains took place under a weak Euro regime - it now remains to be seen how European manufacturing operates when the EURUSD is on its way to 1.40, and when both Germany and France are now warning about the inevitable hit to their exports. Concluding the economic picture in Europe was the unemployment print which remained flat at 11.7%, the same as the revised prior number.
And then, under an hour ago, we had the star event of the day, the second 3 Year LTRO repayment announcement, which was a dud. With expectations soaring, and some expecting as much as €200 billion to be repaid following last week's €137 billion repayment, the ECB shocked the market when it reported that just €3.484 billion would be repaid by 27 banks on February 6, which in turn means a far less than expected contraction in the ECB balance sheet, and a dip in the EURUSD from overnight highs. This has immediately prompted questions of just how healthy are the European banks if they are now repaying less on a total blended basis than had been expected previously.
On the other hand, how one can talk about ECB balance sheet "contraction" when Draghi has pledged unlimited balance sheet support should Europe need it, still boggles the mind, and is precisely that it is unquantifiable that the algos tracking the relative sizes of the European and US balance sheets are unable to parse this in terms of the EURUSD pair. Of course, sooner or later even the ECB will have to enter the global currency war and grow its own balance sheet. At that point the unlimited off-balance sheet support will have to shit to very limited on-balance sheet, and the cycle will repeat anew as the two biggest currency pairs resume their dance, only this time with the USD getting stronger for an indefinite amount of time.
Finally, in the "not all is great news" category, and confirming the LTRO perspective that European banks are far from out of the woods, Dutch bank SNS Reaal NV wasnationalized overnight, the country’s second banking nationalization since 2008, as real-estate losses brought the bank to the brink of collapse.
“I scrutinized all alternative solutions involving market parties,” Finance Minister Jeroen Dijsselbloem said. “Yesterday night I found myself compelled to conclude no acceptable total solution was offered. I therefore had to use the instrument of last resort, which is nationalization.”

The lender, which acquired ABN Amro Holding NV’s property- finance unit in 2006, has been hurt by losses on real estate loans that have left it struggling to repay a government bailout before next year’s deadline and bolster capital buffers. The nationalization includes all issued shares, core tier 1 capital securities and subordinated bonds, the ministry said.

SNS shares were suspended in Amsterdam. They last traded yesterday at 84 cents, valuing the company at 242 million euros, and have declined 57 percent in the past year.
And with Europe largely out of the way, it is now the US' turn, where all eyes turn to the non-farm payrolls number to be released at 8:30 am, which will be great if it is bad, as it means much more unlimited QE, and greater if it is good, as it means the "recovery" is sustainable, and the manufacturing ISM just after.
Some more on the overnight action from DB
The first payrolls report of 2012 is expected to deliver a modestly better headline number than the one in December. Indeed the market consensus is for a headline of +165k versus +155k previously. Private payrolls and the unemployment rate are expected to remain broadly steady at +168k and 7.8% though. One interesting theme to watch in 2013 is if the seasonals again dominate the data and indeed payrolls. Joe LaVorgna pointed out that in each of the last two years, employment started the year on a strong note only to weaken noticeably by the third quarter.
There has been talk of the financial crisis distorting seasonal adjustments. Payroll reports are obviously now going to be watched even more closely in 2013 given the current Fed’s policy in linking QE to labour market conditions. This does leave the rates market vulnerable to strong prints. Volatility on payrolls Friday could be significant this year.
Employment data aside the US ISM manufacturing is expected (Bloomberg) to remain largely steady in January versus last month (50.6 v 50.7) but the stronger than-expected Chicago PMI yesterday (55.6 v 50.5) might raise some hopes. In Europe, Italy’s PMI manufacturing is expected (Bloomberg) to rise modestly to 47.4 from 46.7 last month while Spain’s is expected to also improve a smidgen to 45.5 from 45.3. Steady improvements in these two countries is needed. The problems will arise if we start to plateau before we get close to 50.
In terms of markets, the highest Chicago PMI print since April with solid improvement in the underlying details did little to enthuse month end trading. The S&P 500 traded down to close -0.26% lower on the day. A fairly downbeat outlook from UPS and a higher-than-expected initial jobless claims data (368k v 350k) probably didn’t help although it was a mixed day for data watchers. Personal income rose more than expected (+2.6% v +0.8%) in December largely driven by dividend income ahead of scheduled tax increases although Personal Spending stats were a little below expectations (+0.2% v +0.3%). UPS’s shares fell 2.4% on the day despite announcing a larger share buyback programme this year which was viewed as a credit negative by the rating agencies. In other markets the CDX IG pulled back from its recent wides to outperform equities for the first time in many days. The index closed 1.5bp tighter while HY credit also saw some support yesterday.
Asian equities are mixed overnight. Gains are being led by the Shanghai Composite (+0.5%) and the ASX200 (+0.87%), while the Hang Seng (-0.3%) and KOSPI (-0.2%) lag. The official Chinese manufacturing PMI for January fell short of market consensus (50.4 v 51.0) and also down from the 50.6 print seen in both December and November. Meanwhile, the final HSBC version (52.3 v 52.0
expected) came in stronger...
The Nikkei (+0.3%) is also outperforming helped by further JPY weakness (92.2). The US Treasury 10-year yield added 2bp and is currently trading a shade over 2.00%.So all eyes will be on Payrolls and the ISM/PMI numbers and crucially the reaction in the rates market.