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Anticipating The January Employment Report

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    February 7, 2014

    The most important economic news this week is Friday’s employment report from the Bureau of Labor Statistics. This monthly report contains a wealth of data for economists, probably the most significant in the near term being the month-over-month change in Total Nonfarm Employment (the PAYEMS series in the FRED repository).

    Today we have the January estimate for nonfarm private employment from ADP at 175K new jobs and a lower TrimTabs estimated range of 125K to 155K total new jobs.

    The ADP 175K estimate came in a bit below the Investing.com forecast of 180K for the ADP number.

    The Investing.com forecast for Friday’s BLS report is 185K nonfarm new jobs (the actual PAYEMS number). The Briefing.com PAYEMS consensus is 175K new jobs and their own estimate is for a lower 150K.

    Here is an excerpt from today’s ADP report:

    “The U.S. private sector added 175,000 jobs in January, which is in line with the average monthly growth throughout 2013,” said Carlos Rodriguez, president and chief executive officer of ADP.Mark Zandi, chief economist of Moody’s Analytics, said, “Cold and stormy winter weather continued to weigh on the job numbers. Underlying job growth, abstracting from the weather, remains sturdy. Gains are broad based across industries and company sizes, the biggest exception being manufacturing, which shed jobs, but that is not expected to continue.”

    Here is the press release from TrimTabs:

    “The Fed is far too optimistic about the U.S. economy,” said David Santschi, Chief Executive Officer of TrimTabs. “Neither real-time tax data nor key credit indicators points to the acceleration in economic growth that so many on Wall Street think is underway.”TrimTabs’ employment estimates are based on an analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees. They are historically more accurate than the initial estimates from the Bureau of Labor Statistics.In a research note, TrimTabs explained that it is citing a range rather than a single figure for its January estimate because the impact of bonus shifting last year is skewing income tax withholdings. Many employers paid bonuses that would normally have been paid in January 2013 and February 2013 in December 2012 to avoid higher income tax rates. Some of the withholdings on bonuses paid in December 2012 were not received by the Treasury until January 2013.”The impact of bonus shifting will continue to skew withholdings through this month, so we’ll be providing a range for our estimate for February as well,” noted Santschi.
    TrimTabs reported that wage and salary income—which includes year-end bonus payments—edged up 0.5% year-over-year in real terms in January after dropping 4.1% year-over-year in real terms December. It attributed the volatility in the data mostly to the timing of bonus payments.

    Here is a visualization of the three series over the previous twelve months along with the ADP and TrimTabs estimates for January. I’ve used the top end of the TrimTabs range for this chart.

    A key difference among the three is that the ADP and the BLS series, unlike the TrimTabs data, are subject to substantial revisions. Also, as I point out in the chart above, TrimTabs tracks all salaried US employees; ADP tracks private employment, and the BLS series is for Nonfarm Payrolls.

    For a sense of the critical importance of nonfarm employment for the economy, see my Big Four Economic Indicators, which I will be updating on Friday.

    Images: Flickr (licence attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.


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