Mish's Global Economic Trend Analysis |
- Mood Swings: Economists Rush to Lower Payroll Estimates; What to Expect on Thursday and Friday
- Debt Ceiling Discussion on Daily Ticker with Mish, Aaron Task, Henry Blodget: Will the Bond Market Eventually Force Congressional Hands?
- Mish on Yahoo Finance Daily Ticker on Slowing Global Economy; U.S. Manufacturing ISM Plunge; Order Backlog and New Orders Barely Above Contraction
Mood Swings: Economists Rush to Lower Payroll Estimates; What to Expect on Thursday and Friday Posted: 01 Jun 2011 09:20 PM PDT It's a never ending source of amusement that economists can never think in advance. Instead they revise estimates after the fact to be in line with the data. Weekly Claims Numbers On Thursday the weekly claims numbers come out. I am writing this Wednesday evening. The number 4-week moving average of weekly unemployment claims is relatively easy to call. The number to beat is 438,500. Over or Under? Expect a drop (an improvement) in that number. In light of recent data a drop may see counter-intuitive but it is highly likely. The reason is simple. The last four weeks' claims numbers are, in order: 424K, 414K, 438K, and 478K. 478,000 drops off the list. It will be replaced by the numbers for the week ending May 28. Unless that number is greater than 478,000 the moving average will drop. I will take the under on 478,000 and thus the under (expecting a drop) in the moving average. My guess is the 4-week average will be between 420,000 to 430,000. For an actual guess, I select 427,000. If the number is lower expect the bulls to trump it up. Instead it will simply reflect an abnormally high number dropping off the average. Monthly Payroll Report Gaming the 4-week moving average of unemployment claims is the easy part. The tough part is gaming Friday's monthly payroll report. Two days ago I would have taken the "way-under" in regards to economic estimate consensus. I meant to mention that in Market Ticker in regards to the Slowing Global Economy, but I forgot. Apologies offered. However, in light of recent "unforeseen" by economists news, economists' estimates are now far lower. Economists rush to mark down payrolls estimates Please consider Economists rush to mark down payrolls estimates Reflecting one of the largest one-day mood swings in recent memory, the downward revisions now place last month's job growth at 125,000, the weakest since the 68,000 positions created in January and down from the average of 233,000 over the past three months.Who cut forecasts and by how much
Did the Lemmings Overshoot? It is very difficult to know if the lemmings overshot or not. On one hand McDonald's allegedly added 50-70 thousand jobs and those jobs may affect the establishment survey. However, no one knows because the BLS in its infinite "wisdom" will not confirm who is in the survey. Moreover, burger-flipping jobs tend to increase in summer months so one has to seasonally adjust. Then again, 50-75K is likely to be in excess of seasonal adjustments. Finally, I do not know if McDonald's is in the ADP survey either. Regardless, picking a number is a crapshoot. It always is, but particularly true now. The Real Deal It really does not matter if McDonald's added 50,000 jobs or not. Flipping burgers will not fuel a recovery. Moreover, even if McDonald's did add that number of jobs, it is a one-time affair. I wonder how many desperate engineers or recent college graduates took those jobs out of desperation. The sad fact of the matter is that unemployment has been dropping for a year based on burger-flipping jobs, part-time jobs, or people dropping out of the labor force. Since April 2008 6,484,000 dropped out of the labor force. In the last year alone, 2,916,000 dropped out of the labor force. For a discussion of exactly what questions the BLS asks to determine the unemployment rate, please see Reader Question Regarding "Dropping Out of the Workforce"; Implications of the Falling Participation Rate Here's the real kicker. In the last year the number of people employed FELL by 292,000! Yet. miraculously the unemployment rate dropped nearly 1%. On that count, the unemployment rate should have risen at least 1%. What to Expect on Friday? Garbage. That's what. Officially I will take the under on jobs and the over on the expected unemployment rate of 8.9%. For a guess on the latter, 9.2% seems reasonable on the data (and that was my opinion before the ISM and ADP reports). However, Lord only knows how many people the BLS might say dropped out of the labor force. If burger flipping saves the day, it won't last. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 01 Jun 2011 12:45 PM PDT In the second of three videos on the Daily Ticker recorded yesterday, please consider Debt Ceiling Vote a "Political Sideshow", Mish Says: Real Issue Is "Govt. Spending Run Amok" By a whopping margin of 318-97, the House Tuesday evening overwhelming rejected a proposal to raise the debt ceiling without accompanying spending cuts. The so-called "clean" debt ceiling vote was expected to fail and leaves Congress two months to reach a compromise before U.S. government goes into technical default on its debt. (See: U.S. Hits the Debt Ceiling: What Does It All Mean?)Small Correction I need to make a small correction to the text above. Until the official start of QE2 I was generally bullish on treasuries. I called for record all time low yields across the entire yield curve and we got it. Then new record lows in yield came on 2-year, 3-year, and 5-year treasuries just prior to start of QE2. 10-year and 30-year treasures did not come close to new lows. That was it for me. At the end of October 2010, just before QE2 started I changed my tune and became bearish on all but very short-term treasuries. However, we might see yet another "flight-to-safety" trade in the long-end of the treasury curve. Indeed, we may already be in one. Yields have come down substantially. This time, I am on the sidelines of that treasury rally. Will the Bond Market Force Congress to Act? If Congress and Bernanke continue on the current path, yields are likely to rise unless there is another serious recession, and they may rise regardless. Spending is unsustainable and everyone but Keynesian clowns realize it. Even Congress realizes it, they just lack political will to do anything about it. Something will give eventually, or ultimately the bond market will force its will. That could be quite a ways off as Japan proves. Session Video A few sharp minds may have noticed this was recorded yesterday yet the discussion was on the failure of Congress to raise the debt ceiling, before the vote took place. However, It was widely understood by everyone involved that Congress would not hike the ceiling. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 01 Jun 2011 09:11 AM PDT I had the pleasure of doing several segments on Yahoo Finance Daily Ticker on the slowing global economy with Aaron Task and Henry Blodget. Please consider What Recovery? The Economy's Weak And Getting Weaker, Says Mish This month marks the two-year anniversary of the "recovery" that began in June 2009. But you can easily be forgiven if you haven't noticed. The above video was recorded yesterday, well in advance of the just released Manufacturing ISM numbers. If the video does not play, please click on the preceding link. May 2011 Manufacturing ISM Report Please consider the May 2011 Manufacturing ISM Report On Business® "The PMI registered 53.5 percent and indicates expansion in the manufacturing sector for the 22nd consecutive month. This month's index, however, registered 6.9 percentage points below the April reading of 60.4 percent, and is the first reading below 60 percent for 2011, as well as the lowest PMI reported for the past 12 months. Slower growth in new orders and production are the primary contributors to this month's lower PMI reading. Manufacturing employment continues to show good momentum for the year, as the Employment Index registered 58.2 percent, which is 4.5 percentage points lower than the 62.7 percent reported in April. Manufacturers continue to experience significant cost pressures from commodities and other inputs." Price, Profit Squeeze Coming Prices plunged this month along with everything else. However, prices are well above contraction. Orders on the other hand are barely above contraction. Either commodity prices plunge, or manufacturers get hit in a price and profit squeeze with falling customer demand. Which will happen? I think both. For more on the slowing global economy please see China's Manufacturing Slowest in 9 Months, New Orders Suggest Manufacturing May Have Already Peaked; Australia Biggest GDP Drop in 20 Years Addendum: That was the first of three videos. The second video was a discussion on the debt ceiling. Please consider Debt Ceiling Discussion on Daily Ticker with Mish, Aaron Task, Henry Blodget: Will the Bond Market Eventually Force Congressional Hands? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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