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May Unemployment Report:
UPDATED as of 9:00AM >>

Posted by Larry Doyle on May 8, 2009 7:17 AM |

Before this morning’s numbers were released, I published:

The widely anticipated May Unemployment Report covering the month of April is due out this morning at 8:30am (EST).  Will this report show signs of improving trends in the pace of layoffs? Aside from the actual report, we need to pay strict attention to the revisions for prior months to assess the overall health of “our patient.” In regard to revisions and the actual report, a month ago I had written in my post April Unemployment Report: 

Analysts hit the numbers, as they came in as expected. Wow! Are the analysts that good or are these numbers being “managed” or “massaged” so as not to overly upset the markets?  Well, we did have a significant revision to January’s report. Let’s dig deeper!!    

Call me paranoid, but when a January Non-Farm Payroll number is revised from a loss of 655k jobs to 741k and no revision is provided for February, I immediately ask why. 

Previous month’s data and expectations for the May report are as follows:
**Note: I have now included the actual unemployment statistics (which were released at 8:30AM), along with my post-report commentary:

Unemployment Rate
      March: 8.1%
      April: 8.5%
      Expectation for May: 8.9%  (recall how this rate was the base case used for Bank Stress Tests…and here we are hitting it in May!!)
      
Actual for May: 8.9%

Post-report comment: as expected . . . however, the Underemployment Rate is now 15.8%. This rate consists of those unemployed and looking for work, unemployed and have given up looking, and part-time workers who would prefer full-time. To that end, I wonder how many temporary workers in the Census Bureau would prefer full-time work. 

Non-Farm Payroll (click here for definition of this term)
       March: loss of 651k
      April : loss of 663k
      Expectation for May: loss of 600k 
      Actual May report: loss of 539k
      Revisions: February and March combined lost another 66k jobs

Post-report comment: on the face, the report appears better than expected but given the additional job losses in the revised numbers for February (an additional 18k jobs) and March (an additional 48k jobs) we are still in the 600k average job loss for the month. Private sector lost 611k jobs while government added 72k jobs with a lot of those people being temporary workers employed by the Census Bureau. The fact that temporary government workers are factored into overall employment, in my opinion, is stretching the integrity of the report. Health care added 17k jobs, manufacturing lost 149k jobs, construction lost 110k jobs, financial services lost 40k jobs. 

As I referenced above, I will be looking for a February revision as well.

Average Hourly Earnings
      March: +.2
      April : +.2
      Expectation for May: +.2
      
Actual May report: +.1 

Post-report comment: businesses are doing everything to manage costs. This number is lower than expected and will not help consumer spending and retail sales going forward. With no wage pressures, this component of inflation will remain in check 

Average Hourly Workweek 
      March : 33.3 hours
      April: 33.2 hours
      Expectation for May: 33.2 hours 
    
 Actual May report: 33.2 hours

Post-report comment: as expected…

Please check back shortly after 8:30am to review the numbers and market reaction!! In pre-market trading, stock futures indicate the market would open higher by approximately 1%. The 10yr U.S. Treasury is quoted at 3.35%.

Post-report comment: the bond market has rallied marginally as the overall report continues to show weakness throughout the private sector. The equity market is a touch lower. Analysts are spinning the report as a slowing in the pace of declines. Does this report portend an improved tone in spending, economic activity, and lessened defaults and foreclosures? Not in a hurry.

If you like what you read and see here, please put Sense on Cents in your favorites, and visit and comment often!! Thanks!!  

LD 

  • Mountainaires

    Good post LD, thanks for the round-up on this one. Best blogging on it I’ve seen this morning on my usual rounds from Bloomberg to Calculated Risk to Big Picture to Mish.

  • Larry –

    Outstanding analysis. Thank you for questioning why the revisions for previous months are always FAR worse than the initial report. This has happened basically every month with this jobs report now for the last 5 or 6 months in a row. It also happened with 1st quarter GDP, as the first report was like negative 3.8% and then it ended up really being negative 6.1% – a huge difference. We lost close to 3 million jobs in the 4-month period from December – March. 3 million jobs lost in 4 months? That is just jaw-dropping. So I don’t think we can get too excited that this is the “lowest” or “best” number in 5 months, because the last 4 months were horrifying. Just because it’s better doesn’t mean it’s good. Thank you also for mentioning the underemployment rate of 15.8%, and also that including temporary government census workers diminishes the credibility of the overall number. Great analysis Larry and I agree with you 100%.

    Matt

  • Unfortunately the statistics do not take into account people that were receiving unemployment benefits but no longer receive them due to the length of time these benefits are paid. There are thousands if not hundreds of thousands in this situation that the statistics do not account for.






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