As I type this, the consensus is still for a payrolls gain of about +150,000 tomorrow. Based on the poor performance of initial jobless claims in the last month, I am expecting a considerably poorer report, on the order of only +50,000. I base this on the difference between how payrolls behave in the face of rising initial jobless claims vs. falling claims.
Below is an update of my scatter graph comparing initial jobless claims vs. nonfarm payrolls that I first ran several weeks ago. I included the deterioration in jobs leading up to and into the recession in red. Note how the red line traces a very different path than that of the recovery:
This is why I dismissed the straight line Prof. Delong drew at 400,000 jobs as the dividing point between job growth vs. losses. It simply makes a world of difference whether you are deteriorating into recession, or in recovery coming out of recession, leading to very different scatterplots as above (the same pattern is true for every other postwar recession).
But how should we expect jobs to behave in the face of seriously climbing initial claims? We only have one true example, of a double-dip, and that is the failed 1980 recovery turning into the 1981-82 recession. Here is the scatter graph for that double dip, showing the abortive recovery (blue) and the double-dip (red):
Even with the "summer stall" last year, where GDP only fell to +1.7%, nonfarm payrolls fell into and remained in 5-digit territory. Hence my expectation for tomorrow is that nonfarm payrolls retreat into 5 digits.
If that happens, watch Oil and see if it falls to a new post-April low. Only the real fear of a double-dip will cause the chokehold to loosen.
6 comments:
Correct me if I'm wrong, but I think initial claims were actually higher in April than they were in May. And yet the April jobs number was quite good. Dont know if that means May will be better than expected or April will be revised down or both.
The "April" report ended before the worst of the spike (though it also ended before that infamous McDonalds 62k hires). This means the "May report" will encompass a lot of the pain from those spikes.
These reports generally cover closer to a 15th-15th month range than the 1st-30th month range. That probably explains why there is frequently confusion about what the reported number is versus what the four BLS unemployment numbers were for that "month's" report.
Calculated Risk has speculated +100,000 for tomorrow's number, but given how especially terrible the four weeks following the end of the April report were, I would agree with NDD that we're only going to be in the +50,000 range.
I'm thinking 115,000...we'll see.
It was 54 000.
You're both genii!
I am reminded of the novel by Isaac Asimov, in which the hero figures out that there are villains -- by his lights -- lurking, because the econometric and sociological quantitative predictions of his organization are *too accurate*, and there are not fluctuations left.
But great work again!
Having said that, I actually am saddened for the people who would have been better off with a 500 000 outcome.
I'm impressed, but you did miss the number by 4,000, see if you can do better next time. Just kidding.
You just gained another enthusiastic fan.
Jeez...did I blow that one.
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