Archive for June, 2008

NIPA Note: Profitability continues its slide

Originally published
March 27, 2008

This morning’s release of the fourth quarter corporate profits data
underscores the argument we’ve been making for some time now:
profitability peaked in in 2005, and has been heading down since 2006.
A graph of this series, pre- and after-tax:


by Philippa Dunne· · 0 comments · Red Flags

Comments on April Employment

Originally published May 14, 2008

Though headline job losses were smaller than expected in April, the details of the report were weaker than the first impression would encourage. And even though the household survey was stronger than its payroll counterpart, as advertised by the decline in the unemployment rate, a look under its surface also uncovers weakness.

Total employment was off by 20,000, though plus signs were very hard to come by as you scan the sectoral breakdown. Construction fell by 61,000, about evenly divided between residential and nonres; manufacturing shed 46,000, almost all of it in durables. Private services gained 81,000, but many major sectors declined. Wholesale trade was off 11,000; retail, -27,000; information, -2,000. Finance, somewhat mysteriously, gained 3,000. The biggest gains were in health care, up 37,000; bars and restaurants, +18,000; computer systems design, +10,000; and administrative and support services, +13,000. The last sector got no help from its temporary help component, which fell 9,000. Government added 9,000, thanks to an unusually large gain of 4,000 in federal employment. State and local employment was up just 5,000, about a quarter its average over the last year. Budgetary pressures may finally be taking their toll on public employment.

Does it fizzle? Does it sizzle

No. It just lays there.

Originally published March 6, 2008

Surely all memory of the 1950s send-up of the original “kerplunk goes the tablet that gives the fizz” ad has long faded, but its apt description of the American job market is recently won.

In recent years our job market has indeed lost much of its fizz. This point is best made by the BLS’s quarterly business employment dynamics (BED) series. It comes out with a long delay—figures for the second quarter of 2007 were only released on February 14. But the BED series is very useful in analyzing longer-term trends.

Net changes in total employment over time are a function of gross job losses and gains. For example, in 2006, there was a net gain of 1.7 million jobs in the private sector, according to the BED program. (This number differs from the establishment survey.) But that net gain came from a gross gain of 30.8 million jobs, and gross losses of 29.1 million jobs. That’s quite a furious pace of turnover under a rather placid surface.

Forget the Participation Rate

Originally published January 25, 2008

That’s what Chairman Jim Saxton (R-NJ) and his Joint Economic Committee advise anyway, and they seem to have a point. In their analysis of the merits of the various employment indicators in predicting recessions, they find that the participation rate with its laughable value of –161% is “actually bizarre” in that it tends to rise at the same rate during both expansions and recessions. That takes care of the booby prize. In terms of ability to predict recessions, balancing value and reliability, the initial UI series (weekly claims for unemployment insurance) ranked first, as did changes in the unemployment rate among the monthly indicators. Sad to say, the payroll and household series “are of no value as recession indicators.”

The Best
Series Value Reliability
Initial UI claims 76% 0.5
Employment/Population Ratio 51% 0.3
Continuing UI Claims 43% 1.8
Unemployment (CPS) 27% 0.8
Unemployment (MA) 15% 1.6
Unemployment (12M) 0% 2.5

The Worst
Series Value Reliability
Labor Force Participation -161% 0.1
Civilian Employment (MA) -80% 1.0
Payroll Employment (real time) -23% 1.3

More here:

– Philippa Dunne & Doug Henwood

Whiplash: Trading on the MTS Rollercoaster

Originally published January 12, 2007

There ain’t no seat-belt hefty enough to keep you in your seat if you decide to take positions based on evidence in
the Monthly Treasury Statements. 

Every couple of months, an analyst seizes on a fluctuation, often a wild fluctuation,
in the Monthly Treasury Statements to make the case that the job market is either far stronger or way weaker
than the Bureau of Labor Statistics’ estimates suggest. Oh, OK, these remarks do come disproportionately
form those on the hunt for evidence that the Bureau of Labor Statistics is underestimating payrolls, witness recent attention to January’s surge in withholding at the federal level, recent stories focused on another strong showing in March receipts, and the fact that once the “hidden strength” story is out in the markets for a given month, the almost inevitable reversal in the following month never makes it to traders’ screens.

by Philippa Dunne· · 0 comments · Comments & Context