Unemployment News Today

At 8:30 this morning we get the unemployment news for last month. While largely an exercise in "feigned precision" and subject to numerous and substantial later revisions, it will confirm the general direction and trend of job creation in the U.S. economy.

While the report won't give us any answers to what ails us, it will probably tell us what we already know --- job creation is too slow and the economy is muddling along at a too slow pace.

The best advice is not to get to wrapped up in the precise numbers reported, and especially the unemployment number (7.6% as reported last month). Even the jobs created number, generally estimated to be about 150,000, is an informed guesstimate at best.

The contents of It's a Hard Job Predicting Payrolls Number are worth considering:

"Carnival barkers have it easy. Aside from the fact that all they put at risk is a 50-cent plush toy against a $1 bet, guessing a reveler's weight and age is simpler than it seems. Economists, on the other hand, are playing a mug's game by predicting the most-watched U.S. economic release of the month, nonfarm payrolls.

A trader at the New York Stock Exchange in April.

The Wall Street consensus for March, for example, was off by more than 100,000—a huge miss. But, compared to the total number of jobs, it was a discrepancy of 0.07%. Throw in the fact that the figures are subject to revision and massaged by seasonal adjustments and birth-death models and influenced by the weather, and it's a wonder professional seers don't hurl their HP 12c calculators against the wall.

The temptation may be especially strong on Friday morning, when April's figures are released. Economists polled by Dow Jones Newswires see growth of 148,000 jobs. That is up sharply from March's 88,000 figure but much lower than February's stellar 268,000. The range between the top and bottom estimate is 90,000. . . .

The last time there were two sub-100,000 readings in a row was in the winter of 2010-2011. If April was weak, it would stem more from a reluctance to hire than from firings. Weekly jobless claims on Thursday were the lowest of the entire expansion.

Another big disappointment would stoke fears the recovery is stalling. Conversely, it also may raise hopes the Federal Reserve will expand the stimulus that helped propel stocks in recent months. Wednesday's policy statement left that possibility open. So bad news might be OK, and vice versa.

Step right up."

What to Expect From the Jobs Report cautions against putting too much credence in the report and suggests three aspects of the report will be worth our attention:

"The economy appears to be slowing and employers may be growing more cautious. But the extent of that slowdown could be muddied by quirks in the Labor Department’s employment report on Friday.

Economists forecast that the economy added around 150,000 jobs in April. That would be better than March’s 88,000 jobs, but still well off the job growth averaging more than 200,000 a month in the winter. . . .

Employers may not be hiring much, but they’re not firing like they used to.

UBS economists forecast payroll growth of 130,000 jobs in April but warn that it’s because of “technical oddities rather than fundamental weakening” in the labor market. . . .

The first read on job growth can feel like a random number generator. The figures get revised twice in later months, and then again down the road. The Labor Department’s statisticians warn that the margin of error for a month’s payroll figures is around 90,000 (in either direction). That usually doesn’t prevent public exuberance or despair when the numbers turn out to be a surprise. But it’s why trends matter far more than the specific figures.

Three trends to watch:

1) Government jobs. Federal budget cuts started in March, but furloughs didn’t start until April. While furloughed workers wouldn’t change the payroll numbers directly, government agencies hit by budget cuts could have cut back in hiring even more when positions opened up due to departures.

2) Retail employment. The retail sector shed 24,000 jobs in March, a surprise drop that suggested the increase in payroll taxes since January 1 may have finally started to hit retailers. Watch this figure – and its revisions to prior months – to know whether retailers are really getting worried.

3) Manufacturing. The Institute for Supply Management’s employment index in April straddled the break-even line between expansion and contraction, dropping sharply from the prior month. Regional manufacturing gauges also highlighted troubles that could signal weakness ahead for the factory sector."

Summing Up

We'll stay tuned and report back after the "official numbers" are released.

Thanks. Bob.