Market Talk

I give up.

There’s nothing pretty about this morning’s jobless claims report.

Claims jump 13,000 to 472,000 in the week ended June 26. The previous week’s level was also revised upward, from 457,000 to 459,000. And all this comes as economists had expected claims would fall by 2,000.

“This is unquestionably a negative, even more so we as we see the Southern states that might be affected by the oil spill not accounting for a large uptick in claims,” Miller Tabak’s Dan Greenhaus writes.

As we mentioned in the opener, a Labor Department economist blames the latest rise on the educational services sector, where bus drivers, cafeteria workers and others lost their jobs due to the summer holidays.

What a crock of … I mean, c’mon. Think about it, the school year coming to an end isn’t some brand new phenomena; it happens every year at the exact same time. Isn’t seasonally adjusted data supposed to take these sort of situations into account?

It also seems like the Labor Department always has an excuse in its back pocket whenever there’s an “unexpected” rise in jobless claims. Remember in early April when the increase in claims was attributed to Cesar Chavez Day? Really?

“These are not normal times, there is not large demand for labor and as such, people whose benefits are going to run out will simply not have the spending power necessary to help drive growth,” Greenhaus adds. “This necessitates a slightly more bearish outlook for growth in the third quarter.”

Delving deeper into the data shows total unadjusted continuing claims for workers collecting more than one week from state, extended and emergency benefits fell to 9.23M in the June 12th week, from 9.60M the week before.

A silver lining? Not quite. Don’t read much joy into the decline — much of it was in the emergency program, which lapsed after the Senate did not act, so long-term workers are exhausting their eligibility and falling off the rolls.

“Bottom line, following the weak private sector job growth seen in yesterday’s ADP report, today’s initial claims data continues to point to a lackluster labor market and another jobless recovery,” says Peter Boockvar, also of Miller Tabak.

(Paul Vigna and Kathleen Madigan contributed to this post.)

Get back to work, you slugs!

Even if you’re an employer, today’s productivity data should worry you (although it won’t.) If you’re an employee, or even worse if you’re out of work, they’re really disconcerting.

Productivity rose an an annualized rate of 3.6%, which outpaced a 1.9% gain in compensation, which led to unit labor costs falling 1.6%. The rise in productivity and fall in labor costs were both more than expected.

Adjusted for inflation, real compensation rose 0.4% from the fourth quarter, but it fell 0.1% from a year ago. Hours rose in the quarter and fell on the year as well.

We’re working harder for less real pay, not even keeping pace with inflation, which the Fed continues to keep pinned down on the floor along with the fed funds rate, stale beer and peanut shells. We’re just working more hours, which is driving productivity.

Wall Street and the White House have been quite pleased with this little burst in consumer spending, but have conveniently ignored the fact that without strong job growth, which will drive wage growth, which is what will really make the consumer whole again, this burst in consumer spending is little more than a federally financed game. You saw today the nation’s retailers report April sales and…surprise! “Consumers cut back their spending in April, suggesting an edgy recovery for a retail industry that was gaining traction in recent months,” Newswires’ Karen Talley writes this morning.

That’s why that productivity number should worry even employers. Without healthy consumers, corporate profits won’t grow. Make no mistake, this little spurt in consumer spending the past few month has been a confluence of several unsustainable trends, some pent-up demand sure, some relief that the worst has passed, but mainly a big transfer of wealth from Uncle Sam, as well as large carrots like the home-buyer tax-credit. Without sustainable, steady job and wage growth, it will not last, and the economy will remain mired in this languid recovery.

Pros outweigh cons in jobs report, but watch those long-term unemployed figures.

There’s a lot to like about today’s jobs data: Six-figure job growth (after two years of losses) has a nice ring to it.

Temp employment’s continued rise, average workweek up and positive revisions show the economy added jobs in three of the last five months all signal optimism about the recovering labor market.

But, as John pointed out, long-term unemployment remains the major sticking point that can’t get overlooked. Swelling ranks of long-term unemployed continues to put a greater burden on the labor market’s eventual recovery.

Labor Department reports nonfarm payrolls rose 162,000 in March, marking the largest gain in three years. The headline number fell short of the 200,000 gain economists were expecting. But considering only 48,000 of the jobs gained were Census workers, the nonfarm payroll report is actually better than it appears. Some observers expected Census to account for half the gain.

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- Jobs market still in convalescent stage. Big drop in unemployment rate, but don’t assume it’s finished rising, David Leonhardt writes at NYT’s Economix blog. ” For it to fall over an extended period, job growth needs to keep up with population growth, which translates to something like 150,000 new jobs a month,” he notes. “The job market is still a long ways from being so healthy.”

- Labor Dept. says January’s 20,000 job losses amount to a job market that’s “essentially unchanged,” a term that irks James Picerno at The Capital Spectator. “It appears to trivialize what is clearly the deepest and longest-running dent in the labor market since the Great Depression,” he says.

- Who’s actually stalling financial reform? Chris Dodd blames Wall Street lobbyists, but that stance irritates former labor secretary Robert Reich. “Call me old fashioned, but I thought Congress was in charge of passing legislation, not Wall Street,” he notes.

- TechCrunch reports Facebook’s completely rewriting its messaging software as it prepares to launch full-featured webmail product — one already being over-enthusiastically dubbed a “Gmail killer.” Henry Blodget says the plan is “brilliant.”

- Some US stock indexes coming close to crossing 10% correction thresholds.

- Drama at Overstock (OSTK) continues. In SEC filing, OSTK says it’s restating 2008 and 2009 results, with $1.7M of income in fiscal 2009 shifting back to previous year because of accounting errors.

- Lag in job numbers behind GDP growth is no worse than in previous recoveries, Harvard economist Jeff Frankel says.

- Jeff Miller discusses benchmark revisions in today’s jobs report. “The jobs picture continues to improve, but there is a long road ahead,” he says. “The evidence is that the engine of job creation was broken during the credit crunch. As yet, there is no evidence of a change.”

- “In this environment, I don’t see how the Fed is interested in substantially tightening policy – but I can see how some policymakers could perceive that their hand was forced if they see a string of upside surprises in growth indicators,” Tim Duy says.

- The time it takes to win it all: The players, coaches, marketing teams and scouts of the Saints and the Colts have worked a total of one million hours this year to get to this moment. WSJ looks at what goes into an NFL season.

We have to get hired sooner rather than later, right?

Anybody else struggling to decipher this morning’s jobs report?

A mixed bag may be the best way to describe today’s employment data. Economy lost 20,000 jobs in January, according to companies and governments surveyed by Labor Dept., representing a cause for concern for optimistic folks hoping to kick off 2010 with some job growth. But the unemployment rate dipped to 9.7%, as households surveyed said 541,000 more jobs were created last month.

So, 20,000 jobs lost or 541,000 jobs created? Tough to say which indicator is more reliable. Ask ten economists and they’ll give you 11 different responses.

But Princeton economist Paul Krugman may have summed up today’s data best: job growth is essentially flat and the rest is noise. Two separate surveys compiled the data and both are subject to significant statistical sampling errors.

“When employment growth is near zero, on either side, it’s not that surprising that the surveys should point in opposite directions,” he says. “The bottom line is that economic numbers are no more than rough indicators. You have been warned.”

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I thought about using an earthquake reference to describe what happened both politically and in the marketplace this week, but it’s far too insensitive given the pain and suffering the Haitians are enduring. But something big and unexpected did happen this week. Actually, it was a number of somethings.

Remember back in January of 2008? The recession had just started but most people didn’t know that yet (I don’t want to name names, but they used to have a show together. Kudlow & Cramer, I think it was called.) Barack Obama and Mike Huckabee staged huge upstart victories in the Iowa caucuses, a totally unexpected pair of upsets. Facts on the ground, as the military says, were changing faster than people were prepared for. This week reminded me of that time. And we all know how 2008 turned out.

The story out of the White House since President Obama was sworn in has been, as it is really with every administration, we’re cool, and we’ve got this thing under control. Between the White House, Congress, Treasury Department and Fed there was a concerted effort to arrest the slide, to prop the economy back up. Wall Street didn’t give the Democratic administration any credit, but was more than happy to play along, if they could turn a profit of course.

That story changed this week, drastically. Even three weeks ago, it was unthinkable that the Democrats would lose Ted Kennedy’s Senate seat. But they did. Given every sweetheart deal the banks have gotten from the DC crowd since this crisis started, it was unthinkable that the president would turn on the banks. But he has. It is still unthinkable that a nation in the so-called developed world, a nation like, say, Greece, could actually default on its debt.

But it’s only January.

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Me? I was just a rounding error.

I find it odious that an unnamed Labor Department economist tried to explain away the rise in jobless claims by claiming it was an administrative backlog that created the rising number. From the Dow Jones story (subscription required):

An economist at the U.S. Labor Department Thursday said last week’s numbers were higher then expected in part because the Christmas and New Years holidays created a backlog in some states.

“It is not an economic thing — it is an administrative thing,” he said.

Think it feels administrative to the poor souls who got fired and had to wait to file claims because government offices were closed the Friday of Christmas? Besides that ugly swipe at the populace, does it matter that there was a backlog in processing claims? The people who are unemployed, are still unemployed.

But beyond the rise in initial claims, there was a jaw dropping rise in emergency extended benefits. These are the second, third and even fourth round of benefits people file for, long after the initial filing. But we had to look at this week’s numbers twice, just to make sure we were reading it correctly.

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Which one of these gets this thing started again?

Nothing in this morning’s jobless claims data to suggest the labor market will start generating job growth any time soon, although the trends for initial and continuing claims continue to improve.

The downward trend in weekly claims is still intact despite the slight rise in today’s data. But initial claims at 444,000 suggests more job losses are ahead.

On the bright side, folks filing for emergency unemployment compensation fell for the first time in a while. One important caveat, though – the reading came during the Christmas week. Labor Department said states reported a little more than 5 million people claiming emergency unemployment compensation ending Dec. 26, a decrease of 141,279 from the prior week. By comparison there were only 1.66 million people claiming emergency unemployment compensation in the comparable week a year earlier.

Whether this datapoint is statistical noise or the beginning of a new trend is something to keep an eye on.

Regardless, many post-recession periods have showcased a abor market that came roaring back. That’s not expected now as layoffs are finally diminishing, but job creation remains another story, James Picerno writes at The Capital Spectator.

“The big test is still ahead of us,” Picerno says. “The transition this time from an economic climate that’s no longer destroying jobs to one that’s generating new positions of some magnitude is likely to be rocky. It’s not yet clear how much job-minting capacity is coming, but we’ll find out soon.”

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Have I found a job? You don't get out of the office much, do you?

As we’ve been saying for some time now, the question regarding the labor market isn’t necessarily how many people are losing jobs, but how many are finding jobs.

And on that latter question, the answers still aren’t very reassuring. Which is why the Obama administration, having trouble generating real, actual jobs via its $787M slush fund, oh, excuse me, that slipped out there, so sorry, I mean its $787M stimulus package, is focusing anew on job creation.

This morning’s jobless claims report provides fresh evidence of the headwinds facing the unemployed. First off, initial claims rose 17,000, to 474,000. That’s still below the 500,000 mark, but that’s really more of a psychological number. Real progress lies closer to the 400,000 level.

And, yes, continuing claims took a big step down, falling by 300,000. But the real story is buried in the press release, when the Labor Department gets around to reporting the claims for emergency extended benefits. This represents people who have exhausted the standard benefits packages, and, because they still haven’t found a job, are applying for the next level of unemployment benefits.

This number spiked by 327,000, to 4.2M. A year ago, it was 729,000; that’s a nearly sixfold increase.

So while people are rolling out of the continuing claims category, they’re rolling right over into the emergency claims bin. Which means they aren’t finding jobs.

“It’s clear that companies are reassessing their staffing needs in the face of the recovery and slowing the pace of layoffs,” said Bernard Baumohl, managing director of the Economic Outlook Group in Princeton, N.J. “But what we’re not seeing is any inclination to begin hiring.”

One of the most important, yet buried, tidbits in this morning’s weekly jobless claims report is this: the Labor Dept. said states reported 3.52 million people claiming emergency unemployment benefits for the week ending Nov. 7. That’s up 22,390 from the prior week, and it’s up from 820,503 a year ago.

That means more than  four times as many people are on “emergency” extended benefits as were a year ago; these are folks who have exhausted the standard 26-week benefit package. This gets to something we’ve been harping on lately: that while the pace of new job losses is decreasing, those poor souls are not finding new work, or having a very difficult — and long — time finding new work.

(John Shipman contributed to this post.)