Factory and Jobs Data Offer Some Hope for Ecomomy

Shawshank, VA 10/20/2011 (PennyPayDay) – Factory activity in the U.S. Mid-Atlantic region rebounded in October and the number of Americans claiming new jobless benefits fell last week, fresh signs that the economy was likely to duck a new recession.

Optimism over the economy was, however, tempered by other data on Thursday showing a drop in sales of previously owned homes last month and only a small rise in a gauge of future growth.

Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 403,000, the Labor Department said. Economists had forecast claims falling to 400,000.

Separately, the Philadelphia Federal Reserve Bank said its business activity index rebounded to 8.7 in October, the highest reading in six months, from minus 17.5 in September.

Any reading above zero indicates expansion in the region's manufacturing. The survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware.

"This is yet another number consistent with a slow-growing economy, but no recession," said Cary Leahey, a senior economist at Decision Economics in New York.

Reports ranging from retail sales to trade have suggested a pick-up in economic activity after a weak first half.

That view was also bolstered on Thursday, with the four-week moving average of jobless claims, considered a better measure of labor market trends, hitting a six-month low last week.

Michael Woolfolk, senior currency strategist at BNY Mellon in New York, said recent data on payrolls and retail sales had "effectively removed the double-dip scenario for the U.S."

"The weekly fall in jobless claims adds to this, and the four-week moving average continues to drift lower. But we are still a long distance from the 200,000 new jobs a month we need for a sustainable improvement in the unemployment rate," he said.

The claims data covered the survey week for the government's closely watched nonfarm payrolls count for October.

First-time applications for jobless aid fell 25,000 between the September and October survey periods, suggesting a step-up in nonfarm employment after payrolls increased 103,000 last month.

U.S. stocks were trading up slightly, while prices for Treasury debt fell. The dollar was up broadly.

An anemic economic recovery has left job growth frustratingly slow and the unemployment rate stuck above 9 percent. The claims report implied employers were not rapidly dismissing workers, despite an uncertain economic outlook.

While most parts of the economy show improvement, the housing market remains a sore spot.

Sales of existing homes dropped 3.0 percent to an annual rate of 4.91 million units, the National Association of Realtors said in another report.

"Housing is still struggling and continues to be one of the biggest drags on the economy. Mortgage rates are low, but unemployment is high so I do not see where the growth can come in housing," said Jessica Hoversen, an analyst at MF Global in New York.

The Conference Board warned that the economy faced a 50 percent chance of recession despite modest gains in its leading index of activity last month.

But there is reason to be cautiously optimistic. After spiking in mid-September, jobless claims appear to have settled near the 400,000 mark that is usually associated with some improvement in the jobs market.

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Jobs Data is Out

Tomahawk, VA 10/7/2011 (PennyPayDay) – The September reading of the Unemployment Rate is +9.1%

This was expected to be steady at 9.1%.

The net change in September for total non-farm payrolls is +103k and the net change for the private sector is +137k

Total payrolls were expected to be up 60k and the estimate for the private sector was +90k.

The September reading of Average Hourly Earnings is +0.2% on a monthly basis and the annualized rate is +1.9%

The monthly change for Earnings was expected to be +0.2% and the estimate for the annualized rate was +1.9%.

The September reading of the Average Work Week is 34.3 hours.
This was expected to be steady at 34.2 hours.

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Guess for September 2011 Non-Farm Payrolls

Tomahawk, VA 10/6/2011 (PennyPayDay) – In August the net change in total non-farm payrolls was no change at all. For the first time since February 1945 and for only the second time in the history of this data series which began in 1939, non-farm payrolls were 0k on a seasonally adjusted basis. Although the figure will probably be revised away the odds of a second consecutive 0k print for payrolls must be pretty high. So, with that in mind, I won’t guess zero, but rather -1k. Additionally I will estimate, if you can call it that, that private sector payrolls will come in at +45k. Both figures are well below the average guesses, according Bloomberg, which shows the total payrolls are expected to be +55k, with the private sector adding 90k.

As is usually the case, the odds are that the street estimate will be too high, but for September that likelihood grows. Bloomberg data for payroll estimates goes back to 1997; in the fourteen year span up to last year the average estimate was higher than the actual release-day figure ten times. Market News International reports that in the last twenty five years the street has been too generous with their guess eighty-five percent of the time. So in this regard it is reasonable to look for something less than the street assumption.

The starting place for the September payrolls is +45k. According to the August statement on employment from the Commissioner of the Bureau of Labor Statistics “in the information sector, employment fell by 48,000 over the month, largely reflecting a strike by 45,000 telecommunications workers.” But, in time for the September survey week, the strike at Verizon was resolved and that means this group was back at work and will be counted as an addition to the private sector payrolls for last month.

The Verizon employees fall into the broader Service sector that accounts for 86% of the total non-farm workers. But aside from this gain from the returning strikers this sector may be a disappointment in the September jobs report. For the first time in a year the employment component of the ISM Non-manufacturing Index fell below fifty, the make or break level for a diffusion survey, down to 48.7. This index has been around only since the late nineties, but during that time frame the employment component result was sub-fifty on sixty occasions. When that happened the net change for the service sector payrolls was a negative number 60% of the time. When you remove the months that coincided with the hiring and then firing for the Census, the service sector payrolls were down 65% of the time in a month when this component was less than 50. The Non-mfg. ISM employment component has been unchanged or down on a month on month basis since May. In the last three months to August the net change in payrolls for this sector has been +13k, in the three month period preceding that the average change was +120k. The dip under fifty for the employment component may be a one off, but the recent trend for this sector is not encouraging. On the other hand the employment components of the ISM Manufacturing Index and the other industrial surveys were generally up on the month, with the exception of the Empire State report. Interestingly though the average Bloomberg estimate for the manufacturing sector payrolls was 0k.

It certainly seems that households were more in line with the service sector report than they were with the others. In September, for the first time since 1983, the Conference Board’s Consumer Confidence survey showed that fifty percent of respondents thought employment was “hard to get”; up seven and a half points since April to the highest mark in twenty-eight years. The University of Michigan Survey of Consumers noted that in September “just 10% expected declines in the jobless rate in the year ahead.” While this is only down two points from August, it was as high as 28% earlier this year and it hasn’t been so low as it is now, indicating a high degree of labor market pessimism, since March 2009, when job monthly losses were at their peak.

But, the biggest piece of the September payrolls report is Local Government Education. For Septembers the ten year average for total non-farm payrolls is +486k on a Not Seasonally Adjusted (NSA) basis. However, the ten year September average for Local Education NSA is +908k, as the teachers and other workers return from summer vacation; all other sectors combined are a net negative in September before the seasonals kick in. The dominance of this sector for this particular month could be a problem this year. Since the beginning of last year the total employment in this sector has been on a consistent slide; budget austerity combined with the end of the stimulus program funds that plugged some fiscal holes for a while. The pace of employment decline for this sector has seemingly quickened. Last September the NSA total hiring for this sector was a twenty-three year low. But when the usual summer vacation layoffs hit in full force in July, as is the tradition for the jobs data, there were more Local Education workers pinked slipped than in any other July in the fifty-six year history of the data series, even though the starting point for the number of these workers was already relatively low. It should be said that just because this sector is the biggest mover in the month it doesn’t mean that is the swing vote for the overall payroll tally. But last year the September Local Education payrolls were -55k on a seasonally adjusted basis, and after looking at path this sector has followed since then it is easy to imagine a repeat of that figure, or worse.

The key question is how many of the Local Education summer layoffs get to return in the fall. There are reasons to believe it will be a smaller group than a year ago. “A survey in May of more than 1,000 school superintendents across the country by the American Association of School Administrators found that 74 percent anticipate having to cut jobs this year,” said the Associated Press in a recent article, “with the majority of those being teachers or teacher aides. An association survey of 692 school administrators found that 48 percent laid off employees last year.” For instance, notes the AP article, “In Austin, Texas, a district with 86,000 students is hiring just 72 teachers. Six years ago, it hired 800.”

If this report is reflective of a national trend then it could be that the Local Education component of the payroll report weighs heavily on the overall figure.

To review: Verizon adds 45k, the rest of the service sector not so good, while manufacturing might add a bit to the total. But the government, in particular education, is likely to take down the total figure to something near, but not exactly, zero.

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Jobs Data Worse Than Expected

Northern, WI 9/8/2011 (PennyPayDay) – The weekly Initial Jobless Claims were up 2k from the week before to 414k for the week ended September 3; the expectation was for 405k.

Continuing Claims were down 30k from the week before to 3.717 million for the week ended August 27.

The federal extended and emergency benefits programs fell 78k to 3.597 million for the week ended August 20.

There were no special factors for this week’s Claims report, but because of the Labor Day holiday the results for California, Virginia, Hawaii and the District of Columbia were estimates.


In July the US Trade deficit was $44.8 billion, significantly below the estimate, and the June deficit was revised down more than one billion to a deficit of $51.6 billion.

The reason for the decline in the deficit was that Exports were up 3.6% on the month, while Imports fell 0.2%.

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Worst Summer on Record for US Teens Seeking Work

Shawshank, VA 9/7/2011 (PennyPayDay) – Teenagers hung out on street corners and on the steps of boarded-up buildings in impoverished downtown Newburgh one blisteringly hot August day this year.

With the economy still in the doldrums and government summer work programs losing funding, there was little for them to do in this town about 60 miles north of New York City.

They were not alone: It was the worst summer on record for U.S. teenagers seeking work, delaying millions of young Americans' entry into the labor force and creating a generation that history suggests may be scarred by the experience.

Only a quarter of the 16.7 million Americans between the ages of 16 and 19 had jobs this summer, the fewest since at least World War II and compared with 45 percent in 2000.

The numbers are especially bad for black male teens from families who earn less than $40,000 a year: only 12 percent had summer work in June and July, according to Northeastern University's Center for Labor Market Studies.

"I want to work and I'm good for anything," said Ashante Coston, 16, from Newburgh, who was spending the day helping his mother look after his baby brother.

Last summer, he worked at a youth center, but this year, he has had no luck finding work.

The teen summer employment rate has plummeted by almost a third since 2006 before the financial crisis and recession hit, and any meager recovery for the overall jobs market appears to have left out teens altogether.

Teens without work experience are going to find it more difficult to find full-time work in the future and are likely to earn less when they do, said Andrew Sum, professor at Northeastern University and one of America's top experts on youth employment.

The problem is not confined to the United States. With youth playing a leading role in protests across Europe and in the Middle East there have been some high-profile calls for world leaders to tackle youth unemployment. Former UK Prime Minister Gordon Brown has repeatedly called it an "epidemic" that cannot be ignored.

Tim Barnicle, a former assistant secretary of labor in the Clinton administration, hopes President Barack Obama will acknowledge the problem when he lays out a new jobs policy on Thursday.

"How do you ensure an experienced, disciplined workforce when you lose years of preparation?" Barnicle asked. "There's also the social aspect: You're suggesting to them they are not worth that much, when at 19 they can't even get crummy jobs."

There are wider consequences too: a lack of morale may sap energy out of the generation on whose shoulders the burden of paying for the retirements of the baby boomers will lie.

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