Today's healthy jobs report sent Treasury yields up but this does nothing for the underlying force which I believe will drive Treasury yields back down - this is the EU situation.When the EU crisis breaks in full force, this bit of economic strength here may encourgage the purchase of dollar denominated assets.
GDP and BLS Jobs
First I want to present a brief analysis of last week's advance GDP for 4thQ2012. This is by Rick Davis of Consumer Metrics Institute.
The Numbers
As a quick reminder, the classic definition of the GDP can be summarized with the following equation:
or, as it is commonly expressed in algebraic shorthand:
In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows:
GDP Components Table
| Total GDP | = | C | + | I | + | G | + | (X-M) | |
|---|---|---|---|---|---|---|---|---|---|
| Annual $ (trillions) | $15.3 | = | $10.9 | + | $2.0 | + | $3.0 | + | $-0.6 |
| % of GDP | 100.0% | = | 71.0% | + | 13.1% | + | 19.7% | + | -3.8% |
| Contribution to GDP Growth % | 2.75% | = | 1.44% | + | 2.35% | + | -0.93% | + | -0.11% |
The above was from Rick Davis. My comments follow.
Most (2.35% of the 2.75%) growth came from inventory build up. If the consumer - who increased spending only 1.44% in that quarter - does not start buying that inventory then the "I" component of GDP will turn negative.
The decline in government spending is not likely to abate soon as state and local governments tighten their belts. We are seeing this both in the "G" component of GDP and in government jobs.
With fundamentals flat to negative so far in 1stQ2012 we are likely to see low GDP growth in the present quarter.
Jobs
This is my my monthly look inside the BLS Employment Situation Report.
- Headline Nonfarm jobs was +243,000. Consensus was 135,000
- Unemployment Rate was 8.3% down from 8.5% in December 2011
- Average hourly wage $23.29 up from $23.24 in December 2011
- Average work week was 33.4 hours down from 33.7 in December 2011
- Private jobs were +257,000. Government jobs were -14,000
Reading beneath the surface:
-Good producing jobs were +81,000.
-The size of the civilian labor force rose from 153,887,000 to 154,395,000.
-The labor participation rate (percent of adult non-institutionalized population who are part of the labor force) fell to 63.7%. It was 64.2% a year ago.
This is the part I find interesting: according to the 4 week moving average of Initial Jobless Claims 1,511,000 people lost their jobs in the last 4 weeks. That normalizes to 1,637,000 lost jobs in a month (there are about 13 4 week periods in a 12 month year.) This is up from the previous month's 1,617,000 lost jobs/month.
The question is this: if 1,617,000 people lost their jobs last month and we gained 243,000 jobs, how did that happen? The answers are in the Household Survey.
In January 2012 BLS measured 4 sets of people entering or leaving the jobs market:
- Job losers and persons who completed temporary jobs was 7,321,000 down 281,000 from December's Job Leavers and down 1,141,000 from January 2011.
-Job leavers was 939,000. This includes anyone who retired or voluntarily left working. This was down 23,000 from previous month and up 25,000 from January 2011.
-Reentrants was 3,325,000. Reentrants are people who were looking for a job a found one. This was -74,000 from previous month and -26,000 from January 2011.
-New entrants were 1,337,000. These are unemployed persons who never worked before and who are entering the labor force for the first time. This was +61,000 from previous month and +84,000 from January 2011.
In summary: fewer people lost their jobs, fewer people left their jobs, more unemployed people got jobs, and more people entered the labor force for the first time. The largest factor was that fewer people lost their jobs. The number of job losers each month is about 30 times the change in jobs. It may be the case that fewer temps were laid off.
Dick Lepre
RPM - SF Van Ness
CA DRE # 01143973 | NMLS # 302379
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