Friday, August 04, 2006

A Trifecta at the Big Picture

Barry Ritholtz of The Big Picture provides some of the very best real-time commentary on the macroeconomy. He offers up three excellent posts today on the release of the July employment figures. The top line number came in at 113,000 net new payroll jobs, with the unemployment rate moving up to 4.8 percent.

In "NFP: Final Piece in Fed Puzzle?" he suggests that the Fed will likely stop its rate increases by September, if not with the next meeting. More interestingly, he provides the explanation for why I have never been interested in the high-frequency activities at the Fed:

All the teeth gnashing over a 1/4 point hike -- is there THAT much difference between 5.5% or 5.25%? I find it quite telling, as it reveals how fragile this recovery actually is. A robust economy with strong job growth and healthy organic expansion wouldn't care a whit about a 5.5% Fed funds rate. Yet the markets have been wailing about the Fed as if they had Bernanke's boot on their collective throats.
This is quite true. A quarter of a point shouldn't really be of such profound interest in the market. It certainly isn't in my book.

In "Where are the Household survey Bulls?" he points out that normally, when we have a weak showing in the payroll (or establishment) survey, those who like to be cheerleaders point to a possibly different outcome in the labor market talk up the unemployment rate (which is fine) or the employment number from the household survey (not fine). Well, this month, the unemployment rate increased. So where are the opportunists this month?

And, finally, in "Where are the bodies? In line at Unemployment," he makes an interesting case for supplementing our monthly news from the payroll and household surveys with weekly news from the Unemployment Insurance Weekly Claims Report. These data pertain to insured (not total) unemployment, the difference being that not everyone who is unemployed is eligible for unemployment insurance. Picking up on a report by Paul Kasriel of Northern Trust, he considers the year-over-year change in initial claims for unemployment insurance. The rationale is as follows:
[T]he recent behavior of initial jobless claims clears up some ambiguity about the interpretation of the weaker payroll growth of the past three months. Some have hypothesized that the recent weak payroll numbers are a result of a shortage of employable bodies rather than slower demand for those bodies. If that were the case, we would expect that employers would be firing considerably fewer employees now than they were a year ago. In fact, they are firing about the same number each week.

Presumably, one could find more detailed information, with a two month lag, at the Job Openings and Labor Turnover Survey.

1 comment:

Arun Khanna said...

The survey should report net new jobs and average pay of new jobs to provide a quantitative and qualitative picture respectively.