October 5, 2007

Labor On Jobs: Oops, Our Bad

Last month, pundits on all sides of the aisle began hyperventilating when Labor reported a decline in non-farm employment for the first time in four years. The loss of 4,000 jobs signaled an oncoming recession, an end to growth, and disaster for the Republicans in 2008. Combined with the volatility of the bond markets, it seemed that the good times had crashed to an end.

Today, however, Labor announced the new numbers for September -- and a little change in August's tallies (emphases mine):

Employment rose in September, and the unemployment rate was essentially unchanged at 4.7 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Nonfarm payroll employment rose by 110,000 following increases of 93,000 in July and 89,000 in August (as revised). In September, health care, food services, and professional and technical services continued to add jobs, while employment trended down in manufacturing and construction. Average hourly earnings rose by 7 cents, or 0.4 percent.

The overall outlook has not changed since last year. Unemployment has remained just about constant in all classes, as has the level of "discouraged workers" (around 276,000). The employment-population ratio remained the same as it has for a year, around 62.9%, which means that the job growth has kept up with the population growth.

Industries seeing job gains are health care (33,000 jobs), social assistance (12,000) and food services (25,000). Accounting services and management consulting both gained 10,000 each in September. Manufacturing lost 18,000 jobs, and home construction lost 15,000, reflecting the slowdown in new home sales. Ironically, one of the industries that showed declining job strength was employment services, which lost 35,000 jobs in September.

Not much has changed in the past year. The economy is still expanding, and employment remains steady at historically excellent levels. Last month's report was simply wrong, and it serves as a reminder that the BLS often underestimates job gains in the first month of reporting. Analysts should wait to see what adjustment occurs in the following month before basing predictions on the data.

In this case, the BLS estimate was not just significantly off but pointing in the wrong direction. That was enough to out all the Chicken Littles. I wonder how many of them will acknowledge the error today.


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Comments (27)

Posted by eaglewings | October 5, 2007 9:46 AM

Worst economy since Herbert Hoover. Or as Emily Litella might say, Oops, Never Mind!

Posted by Colonel_Prop | October 5, 2007 9:50 AM

But wait - Bush tax cuts bad, USA head for recession, us them thar socialists (democrats) will tax you back into obedience, ahh, I mean prosperity.

Wonder how this will play in the media?

I the meantime globalsecurity.org has us with one soldiers death this month - dang hard on the family but pretty good stretch so far (coupled with more takedowns of AQI and AQ leaders).

Did I see a peace treaty (not armistice) being really worked between the norks and South Korea?


May be wrong but another HUGE Bush administration win. Remember - while B. Clinton was doin the interns in the oval office we (or our oversees assets) were getting struck about every 18 months with spectacular attacks - now we have the terrs pinned into a killing field (Iraq and Afghanistan) that they are having trouble recruiting to get into; strong offense translates to great defense. We may get struck again but I would rather be whacking them first.

And another successful BMD test – we can defend ourselves against some livewire nuts out there. Keep the good stuff coming. Of course the democrats say the US worker can’t do that stuff – they know better. Must get rid of all nukes and have the UN troll the world looking for the unbelievers- can’t depend on good ‘ol American ingenuity to solve our national issues – must give up to the new world order (what a load of garbage)

Good News on the economy - keep that American worker working and inventing and ruling the worlds economy. The trolls gotta be hating life always being wrong.

Posted by InlandEmpire | October 5, 2007 9:55 AM

Of note these are on-the-books jobs. I suspect that there is a level of illegal, off the books or casual labor which is not captured in these statistics. Furthermore, many of the building trades are self employed contractors, not salaried/W2 employees. The overall level of business may decrease substantially without counting them as "unemployed". Not attempting to rain on the parade, just pointing out the limitations of what the stats can -an cannot- capture. Illegal alien labor and self employed contractors will be undercounted by this methodology.

PS- Friend of mine sold a 3400 sq foot 20 yr old house on 1/2 acre in 8 wks. Inland, Inland Empire. Just under asking. He's banking the proceeds and waiting for rock bottom...


Posted by GarandFan | October 5, 2007 10:01 AM

According to the MSM, the economy has been in the toilet for the last several years. Armageddon is just around the corner.

Posted by Don H | October 5, 2007 10:15 AM

The 3-month moving average of this number is much more useful. The adjustments made by BLS after-the-fact have been well-documented in Barron's for years.

Posted by NoDonkey | October 5, 2007 10:16 AM

"He's banking the proceeds and waiting for rock bottom..."

I know people around here (Northern Virginia) who did that after 9/11.

I bought my place here from one of them.

Doubled my (well, the bank's) money in six years.

You don't win betting against America.

Posted by mistercalm | October 5, 2007 10:38 AM

Inland Empire said "The overall level of business may decrease substantially without counting them as 'unemployed'."
Conversely, wouldn't you agree that the overall level of business may increase substantially without counting them as "employed". In other words, what diffence does it make? You can't say unemployment is rising regardless of the numbers to the contrary without also conceding employment is rising regardless of the numbers to the contrary.
I think you pretty much have to accept good news for what it is... sorry, libs.

Posted by olddeadmeat | October 5, 2007 10:55 AM


The specific report may be good, but I don't think that justifies feeling like there is strength in the economy going forward.

Warning: short summary of a deep topic - skip to last paragraph if you want.

The construction job loss may be more significant than it appears - if 15,000 officially fell off the roles, how many illegals have already got the axe? That is one of the sectors where there is frequent hiring of undocumented workers.

The point is that the housing market became staggeringly overpriced (especially in Florida and California), and those regions are facing double-digit declines in housing values.

The problem is that housing was been propping up the economy and particularly consumer spending for the last several years, while the housing mortgages were simultaneously being translated into investments than were marketed as "AAA" which were really a blend of high and low quality mortgages. This has resulted in banks having to write off billions of dollars and not knowing what the rest of their portfolios are worth.

161 mortgage lenders have failed so far (see http://ml-implode.com/ for details on each and every one), and the biggest -CountryWide- is on life-support.

Last paragraph - the public is not yet really aware of all of this. They just know that their food and gas bills keep climbing while the fed says inflation is under control. Factor in a 15% to 20% national decline in home values that is developing, and it looks like this Christmas will absolutely suck, economically speaking. Why do you think Wal-Mart is discounting toys now? - Because the writing is on the wall, and an economic storm is building. How bad it will be remains to be seen, but the Dems will love the timing. Even a small rain shower will sound like a typhoon when they are done with it.

Posted by kb | October 5, 2007 11:02 AM

Sorry, Ed, but I can't agree with you on this. First, unemployment is a lagging indicator; it usually turns up after the peak in the business cycle. An expanding economy normally pulls in additional workers from outside the labor force, so a constant employment-to-population ratio isn't indicative of strength. I'll also agree with the spirit of the post of olddeadmeat, that the residential sector is in bad shape and the decline in construction employment is just part of that sign. Up here in St. Cloud, the expansion was two-legged: health and housing. Now we're down to one. (BTW, our manufacturing sector has been increasing, not slowing. That's a little weird, as I wrote in the Quarterly Business Report up here.)

I'm working on a longer post on the August revision, but have a meeting now and will get back to it after lunch.

Posted by NoDonkey | October 5, 2007 11:17 AM

Every time there's a blip in our economy, there are always people here to tell us that, effectively, the end is near and to sell.

And they've been consistently wrong.

Never seem to hear an apology.

Just glad I've never listened to them.

Posted by Immolate | October 5, 2007 11:49 AM

Doomsayers have been wrong so often that it would be tempting to think that the time to sell is when there are no doomsayers. Unfortunately, there is no such time, so you just have to do the best you can and hope for the best.

I'll tell you one thing that I do know--as soon as we all believe that the economy is in the toilet, it will be whether it is or not. What that means in the inverse, philosophically, is that as long as we keep on keeping on and don't panic, any crash will come down more softly than it would have. So the right time to panic is: never.

Posted by skeptic | October 5, 2007 12:03 PM

Look where most of the increases have been: education, health care, social assistance and food service. The first three are almost totally a result of government spending. The last at the bottom rung of the private sector. Thats ok; we'll all just become bond traders or burger flippers. Manufacturing doesn't matter - its so icky! And as Cheney remarked, "Ronald Reagan taught us that deficits don't matter."

Posted by bayam | October 5, 2007 12:27 PM

Don't worry, be happy!

The economy can't go straight up forever and that's not Bush's fault. This isn't China.
However, Bush is to blame for the massive deficits that will greatly restrain the options of whomever inherits the office, Republican or Democrat. By failing to raise taxes to pay for the war, Bush has almost ruled out the possibility of a tax cut to boost the economy when the inevitable happens.

Unfortuantely, the right-wing has killed the technique of lowering taxes to boost the economy during a recession and then increasing some taxes during the boom to pare down the deficit. It doesn't matter if economists love this approach- don't mess with dogma and nice-sounding slogans of the right! Instead, let the deficit continue to grow unchecked. And don't worry, be happy.

Of course, comments about the effects of the housing downturn and credit crunch are all valid. Add to that the negative effects of the dollar's falling value- higher commodity prices and higher prices of imported consumer goods- and the inflation picture could change at any time. Not a great combination of factors.

You don't win betting against America.

Unless you count betting against the dollar...

Posted by RYan | October 5, 2007 1:03 PM

YOu mean the deficit that has been gettign smaller each year at a rapid pace since the tax cuts? That deficit?

Posted by NoDonkey | October 5, 2007 1:11 PM

"Unless you count betting against the dollar..."

I don't.

And if I listened to people like you, bayem, in 2001 I figure I'd be about a quarter of a million dollars poorer. This from a guy who made all of $19,000 in 1998.

After 9/11, how many people out there were saying to invest in stocks, to invest in housing, particularly 2 miles away from the Pentagon?

I didn't listen to you people then and I'm not listening now.

So yes, I am optimistic about America. And I believe in it.

Posted by KW64 | October 5, 2007 1:22 PM

Well Bayam based on your last paragraph, it seems you think the economy will turn down. Therefore, based on your 3rd paragraph you should be quite concerned that Democratics seem to be proposing tax increases in the face of this downturn when you would be advocating tax cuts presumably.

I would not mind giving the Fed a + or - 10% flexibility to raise tax rates or lower them across the board as another economic tweaking tool in addition to interest rates. Raising rates to slow an economy makes the dollar more expensive and discourages exports which is a bad side effect.

I am not greatly disturbed about the dollar decline yet. In view of our historically high and prolonged trade deficet, it could be argued that it has remained too high too long.

The reality is that we have been growing above the long term 3% rate for some time and thus some slowing is expectable, but not alarming. Our unemployment has been below historical averages for some time and thus a slight increase would not be unexpected or alarming. The problem is when people take these normal changes and make so much of them that behavior changes and drives a much larger decline.

PG Wodehouse once used the phrase "as foul a pessimist as ever bit a tiger". Well if you bite a tiger, pessimism may be warranted, but you do not have to bite it in the first place. Similarly, if people cry gloom and doom at a slight downturn, it could create fear that changes behavior and really does bring about ecomomic decline. But you do not have to cry doom and gloom in the first place. To some degree Panic is a matter of choice.

Posted by bayam | October 5, 2007 1:24 PM

YOu mean the deficit that has been gettign smaller each year at a rapid pace since the tax cuts? That deficit?

The overall deficit has stopped growing in size- it has basically settled at around $600 bil a year. Don't confuse that with the national debt:

Posted by bayam | October 5, 2007 1:32 PM

But you do not have to cry doom and gloom in the first place. To some degree Panic is a matter of choice.

Don't you feel kind of ridiculous in saying that the business cycle could be buried if everyone simply had a happy go lucky attitude? Of course psychology matters but it's not so simple...

Posted by Kurt Brouwer | October 5, 2007 1:54 PM

I agree that the payroll employment report was good news, both for September's 110,000 gain and the upward revision for August. Coming in the teeth of a housing slowdown, the credit crunch due to subprime lending woes, plus widespread mortgage and financial industry layoffs as well as surging oil prices, this is quite good news.

I think the Federal Reserve acted responsibly with its September 18th 50 basis point cut in interest rates. Another cut before year-end would be good.

Those who predict a recession will eventually be correct, but their timing is off right now.

Posted by bayanm | October 5, 2007 2:05 PM

And if I listened to people like you, bayem, in 2001 I figure I'd be about a quarter of a million dollars poorer

That's great for you. But I never said that I'm bearish on the stock market or investing in the US. I've been bullish and heavily commited to high growth investments- not that I think the stock market won't correct at some point.

However, if for the last 5 years you kept euros under your mattress instead of dollars, you'd be about 40% cash richer today:

Posted by Adolf Fiinkensein | October 5, 2007 2:39 PM

Get ready for a few similar mistakes in the month before your presidential elections.

Posted by KW64 | October 5, 2007 3:12 PM

Bayam, my optimism on the economy is not based on "happy go lucky" unconcern with reality it is based on realistic assessments.

My concern is that like in 1992 when the reports on the economy's health were downbeat, it was for a political purpose not based on real economic performance. I am concerned that 2008 will see the same. Talking down the economy has real consequences for real people. My comment was that the doom and gloom was not only not realistic but not sincerely given. Rather, it was aimed at political gain.

I also did not like excessive pump priming during election years like 1972 when Nixon was trying to assure his reelection and imposed price controls to tame the inflation rather than restrain the economy the economically sound way.

Thus, while I agreed with your tax program of increases in times of inflationary growth and cuts in times of economic downturn, I believe giving the Fed descretion over tax rates gets short term politics out of the decision and also allows faster action than Congressionally driven tax changes can ever hope to achieve.

Posted by patrick neid | October 5, 2007 3:36 PM


Convenient starting point for picking your euro trade. The real reality is the original Euro peg is at 116.675 with us now trading around 141. About a 20% gain. BFD!!! if you just left your money in CD's over the same time frame your return would be far greater with no market risk. Did I say risk. Yes son I did. Like I mentioned earlier, you chose a convenient starting point for your trade--the exact low of the euro. Did I say low? What you left out was the fact that the euro started trading at 116.675 in January 1999, rallied to 119 a few days later and then dropped to 82 by 2001 where it traded from 82 to 93 over a couple of years until your magic starting point.

this is an honest view of the dollar


It is true we are at a critical junction which will have possibly major impacts worldwide should we break from here. If we don't the worldwide bull market will continue. Over two billion people are being brought into capitalism via China and India. That imperative will be driving the world for many years--despite all the bumps and potholes along the way.

Posted by NoDonkey | October 5, 2007 3:41 PM


I can't argue about the euros.

And my favorite thing about euros is - that they buy food and drink in Europe!

Which, I've observed, along with lodging, cost relatively the same as the do here in Washington DC (more expensive than a lot of cities, but less than some). Why is that, if the euro is so strong against the dollar? Not trying to be smart, but really, I went to Amsterdam, Brussels, Brugges and Ghent last spring and the prices were pretty comparable to here.

And while the food is catching up here and the drink can be imported, it's tragic that we still don't have the inclination to produce the kind of food/drink they do.

But, being the optimist I am, I think we will catch up. Eventually.

Posted by olddeadmeat | October 5, 2007 4:57 PM

NoDonkey, Patrick, KW64, Adolf, et al:

Even broken clocks or liberals are right once in a while.

Here's the last few weeks, all courtesy of the mess in the housing market:

Northern Rock in England has a run on the bank. In the U.S., Netbank fails. Citigroup posts a huge loss. Deutche Bank writes off $3.12 BILLION. Merrill Lynch takes $5 BILLION in writedowns. JP Morgan and Bank of America are about to add another $3 BILLION. WaMu posts a huge loss.

Worse, all of their balance sheets are suspect because the book value depends on someone out their being willing to buy the assets. But the assets are full of toxic loans, and no one wants to take the risk of buying because the risk can't be quantified. Lots of mutual funds, pension funds, and retirement accounts have these toxic assets as well, but only the experts are aware of this, so the average person doesn't know to sweat yet.

Secondary loan markets start freezing up - like a car engine out of oil. Companies start seeing the cost of borrowing money rise. People who want to take out equity loans or need to refinance their mortgages can't. People can't buy homes because the lender pulls of the deal at the closing table.

All out of the subprime mess, which really hasn't started crashing yet! Most of the really stupid loans are due to reset over the next 12 months - that's millions of houses where the buyers will file for bankruptcy or just hand the keys over to the bank, who already is selling 5 other houses on the same street.

Some cities now have up to 18 months of residential inventory sitting empty. The yards are turning brown, the pools are breeding mosquitos, and homebuilders are panicked because they have a lot more finished homes sitting in the pipeline.

Lenders were the first domino, builders appear to be second (all of them are posting losses as well), and in turn go look at Lowe's and Home Depot.

Channeling the Princess Bride - let me sum up: For the past few years the average consumer has funded their lifestyle by borrowing money. Meanwhile food bills, energy bills, health care and housing all increased three times faster more than paychecks. That means the question: "Are you better off now than you were then?" will be a resounding NO when people can't borrow anymore and have to start paying it all back.

When consumers feel worse off, the White House usually changes hands (right now Hillary is the best bet to stop Hillary). Republican strategists should go in disaster mode NOW before it all really sinks into the public mindset and the Dow really corrects.

Six months ago a corpse could get a mortgage if it was still warm. Now even Bill Gates has to pony up his tax returns and 20%. If you don't believe things have changed, go try to get a home equity loan anywhere.

Posted by patrick neid | October 5, 2007 5:35 PM


All true but no longer a surprise. The Market hates surprises.

The market these last two months has gone about discounting the news you are talking about. Look at the charts of all the major banks and brokerage firms. Look at Fannie Mae and Freddie Mac. They have all discounted the news of foreclosures soaring between now and next July.

If we are going lower it will be because of something unknown at this moment. The markets worldwide are at or near making new all time highs.

Until the market takes out the August 16th lows we are going sideways to higher as global trade continues to expand. Housing is simply in the process of returning to what it was always intended to be--shelter and a nest egg, not a flipper's paradise.

Posted by bayam | October 5, 2007 5:59 PM

I believe giving the Fed descretion over tax rates gets short term politics out of the decision and also allows faster action than Congressionally driven tax changes can ever hope to achieve.

You may be right, and this is something that I'd be willing to support if it helped impose some fiscal discipline on politicians. My fear would be that spending plans would simply be increased if a central body marginally increased tax rates.

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