In Daivd Rosenburg's note to clients yesterday, he made some interesting observations about the employment report. A few words of caution. Though David overall view of the world matches with mine nicely, I am actually not the biggest fan of reading his stuff (though I usually glance at it). In my opinion, he is a stereotypical sell side guy except he is bearish (which I understand is not stereotypical). He finds the data that matches his opinion and cherry picks through that data. All July he talked about Redbook numbers which were weak (measures store chain sales during the month), in August these numbers were actually pretty good and he never mentioned them. That stuff infuriates me. So far the numbers below, I have no context. Remember the employment report's data is calculated in two different ways. The unemployment percentage is calculated using a household survey. It determines how many people are looking for a job and who is in the workforce versus out of the workforce. The number of jobs lost is from the establishment survey (also called the nonfarm survey) which talks directly to companies. So David throws these numbers out from the household survey (which caused unemployment to go from 9.4 to 9.7%) but gives no context. So I am left wondering, is this really as bearish as he makes it sound or is it more normal? How could it be more normal? Easily, if things start improving and the news in the evenings starts talking about a rebound, discouraged workers (those who have given up hop in finding a job and aren't even looking and so are not part of the active workforce) all of a sudden start looking for jobs again. That is one reason historically the unemployment rate is always a lagging indicator. Surge in potential workers hit the market as things start to rebound.
Anyway, the paragraphs from David's report yesterday is below. It is interesting, it should make you do a double take but I don't have context or really know how bad that really is.
"What was really key were the details of the Household Survey, which provide a rather alarming picture of what is happening in the labour market.
First, employment in this survey showed a plunge of 392,000 but that number was flattered by a surge in self-employment (whether these newly minted consultants were making any money is another story) as wage & salary workers (the ones that work at companies, big and small) plunged 637,000 - the largest decline since March (when the stock market was testing its lows for the cycle). As an aside, the Bureau of Labor Statistics also publishes a number from the Household survey that is comparable to the nonfarm survey (dubbed the population and payroll-adjusted household number), and on this basis, employment sank - brace yourself - by over 1 million, which is unprecedented. We shall see if the nattering nabobs of positively discuss that particularly statistic in the post-payroll assessments: were are not exactly holding our breath."