Taking The Under

The Unemployment Report this Friday is likely to be the highlight of the week. Last months number surprised to the upside and has likely raised expectations for the report this Friday. I believe market participants will be disappointed.

The government reported figures are estimates and have a decent size margin of error. I believe last months report overstated the strength in jobs. There are three other methods of estimating job losses and all showed weaker numbers.
  • Last month ADP showed a job loss of over 100,000. ADP is the largest payroll processor in the country and has reliable data.
  • TrimTabs uses tax receipts to estimate job losses and they also estimated a much higher number.
  • Lastly, flat jobs growth is correlated with a 4 week moving average of 400,000 new unemployment claims. The 4 week moving average of unemployment claims was well above 450,000 last month.
 

9 comments:

PJ said...

The last point is unreliable now, that's for typical recessions but this one has been much deeper and longer. If hiring were normal for a recovery we'd see job growth with 500,000 weekly unemployment claims. As it is hiring is very weak and so 400,000 may be the right number. Still, the lack of hiring calls into question the recovery figure.

All of your points are valid, and December federal Treasury tax receipts were notably weak -- don't know if TrimTabs had incorporated those.

Even so, I wouldn't be surprised to see a positive print. The BLS report has skewed higher than the ADP report and the tax revenue based estimates for many months, no reason to think it won't again. They have been doing screwy things with seasonal adjustment and birth/death modeling, there's enough scope to move it to the positive side.

Anonymous said...

SOLD SNSS @ 1.28

HOLLA $$$

-OL DAWG

Market Owl said...

Agree, the BLS can make up numbers and massage the data as they please. Market tends to overreact to the numbers either way. So best to fade the initial reaction.

PJ said...

On how the BLS report has been consistently better than the ADP report since early 2009, averaging 62,000 better:

http://blogs.wsj.com/economics/2010/01/06/adp-disparity-could-mean-job-growth-in-fridays-government-report/

Anonymous said...

LONG EDZ @ 4.43

-OL DAWG

Anonymous said...

My gut says financials (already up) are getting ready to explode higher.

Anonymous said...

@ol dawg

why financials in particular?

@owl

"So best to fade the initial reaction." what do you mean by that?

Anonymous said...

That wasn't me that said that about financials. But I am long CT and PROV which are financials but I doubt they have much correlation to the BKX or other mainstream banks and brokers.

-OL DAWG.

Anonymous said...

Oh yeah I also own PCBC which has been more or less a disappointment