U.S. Payrolls: Negative 17,000 + Huge Downward Revisions for 2007

by: Barry Ritholtz February 04, 2008    
Barry Ritholtz

Barry Ritholtz

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BLS data on Nonfarm payrolls is out, and it's fugly: NFP fell 17,000 in January -- the first decline since August 2003 (-42,000).

Health care, retail trade and leisure were up, manufacturing, construction, financial services and government were down.

January's Birth/Death adjustment has been traditionally negative, as it reflects the layoffs and closings of holiday seasonal business. In January 2007, it was -175k. In January 2008, it leapt to -378k.

click to enlarge

The other news is the Benchmark revisions to the full 2007 year employment data (there were also changes in industry classifications, seasonal adjustments). Also buried in the benchmark revisions, were refinement estimates of new business creation (aka B/D). It will take me some time to plow through all of these, but the takeaway was a major downward revision of 2007 Establishment surveys [NFP] by 376,000. Additionally, the Household survey showed downward revisions to both employment and the size of the labor force. The source of the revisions is the Quarterly Census of Employment and Wages [QCEW].

The bottom line: Job creation in 2007 was weak; it was especially punk in the latter half of the year.

Here's my favorite line from a Bloomberg column:

"None of the 80 economists surveyed by Bloomberg had predicted the decline in payrolls, which was the first since August 2003. The median forecast in the survey projected payrolls would rise by 70,000, compared with an initially reported gain of 18,000 in December. Forecasts of an increase ranged from 5,000 to 160,000."

None.

Now let's add some color to that. Consider this recent article: U.S. Will Escape Recession, Economists Say in Survey. This group is a reliable fade. Based on that survey alone, I am going to raise my recession forecast from 80 to 90%.

Charts courtesy of Barron's Econoday

Sources:
THE EMPLOYMENT SITUATION January 2008
BLS, February 1 2008
http://www.bls.gov/news.release/empsit.nr0.htm

Benchmark Article
Daniel Jackson
BLS, February 1 2008
http://www.bls.gov/web/cesbmart.htm

PDF version
http://www.bls.gov/ces/cesbmart.pdf


Related:
U.S. Payrolls Decline for First Time in Four Years
Bob Willis
Bloomberg, Feb. 1 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=a6RXEUjetyGE&

U.S. Will Escape Recession, Economists Say in Survey
Shobhana Chandra and Alex Tanzi
Bloomberg, Jan. 9 2008
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEX73qWiBrb4

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This article has 4 comments:

  •  
    Feb 04 08:43 AM
    it's fugly out there for sure. The stuff will hit the fan and the bears will be back in control very shortly. Thousand point rally from 12700? These guys are living a fantasy, and CNBC should be ashamed for all the little guys who buy into this and will get their clocks cleaned.
    Reply | Link to Comment
  •  
    Feb 04 12:00 PM
    Imagine the implications when the Service sector, which employs 82% of the work force, starts deteriorating more rapdily than the Manufacturing sector. I have posted on this theme.
    Reply | Link to Comment
  •  
    Feb 04 01:09 PM
    Recession 'R U.S.
    Reply | Link to Comment
  •  
    Feb 08 02:33 PM
    Is that table B above really correct? I don't remember the exact months, I think it was August last year when non farm pay rolls came out 4K in the negative but one month later it was upgraded to something like +80 or 90K.

    Table B does not say such a thing...

    And I remember it relatively good because that was when I decided not to money trade the non farm payrolls because they are far to unreliable. It is just like they throw some dice...
    Reply | Link to Comment
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