The devastating jobs report confirms my December recession call, now I bump up my recession call for December to 80% and January to 90%. As we speak thousands of economists and analysts are adjusting their brains into new reality. Bloomberg said:
None of the 80 economists surveyed by Bloomberg had predicted the decline in payrolls, which was the first since August 2003. The median forecast in the survey projected payrolls would rise by 70,000, compared with an initially reported gain of 18,000 in December. Forecasts of an increase ranged from 5,000 to 160,000.
Most economists are just extrapolating the trends, what a lack of imagination!
The second most important thing to learn is that the whole 2007 is revised down 376,000 jobs. That brings once again a very important conclusion that everyone must remember once and forever:
- Employment is a strictly coincident indicator when economy tops
- However it takes at least 3 month lag to properly estimate employment, which makes a monthly NFP report a lagging indicator
- Employment is a lagging indicator at the bottom of the economic cycle, the calculation lag in the NFP report makes it even more lagging, it could lag the GDB growth bottom by as much as 6-10 months
I think we just got the most important NFP report in few years, which triggers a recessionary thinking. From now on the NFP report is quickly losing its importance again, because it will lag the bottom of economic cycle. I suggest to ignore it all the way down, it’s useless and it’s a brain trap.
The much better indicator to determine the end of recession is a sector rotation model, but it’s too early to discuss it – we have at least a half a year of violent downside straight ahead!
February 1, 2008 at 10:54 am
Feds just lent $11 bln at 2.36%. This is a deeply recessionary discount, welcome to new reality!
And it still was a drain…
February 1, 2008 at 11:12 am
I would like to use the “half year of violent downside” you mention profitably. It sounds like reading textbooks on sector rotation theory is in order. Could you please mention any specific titles suitable for the diligent amateur?
thanks
February 1, 2008 at 11:48 am
Plantagenet – I don’t know the best book on sector rotation. I will appreciate if anyone will add his favorite books.
But this book “Intermarket Analysis: Profiting from Global Market Relationships”
Amazon.com: Intermarket Analysis: Profiting from Global Market Relationships (Wiley Trading) (9780471023296): John J. Murphy: Books
is more than enough to start. You’ll finish reading it well before we reach the bottom
February 1, 2008 at 12:43 pm
Now, now, you know there is no such thing as recession. We have a “soft” laneding. All we need is more “democracy” and “flower power”.
February 1, 2008 at 12:46 pm
Please comment the increase of the price index from 68 to 76 in todays ISM. Doesent that mean the the marginals decrease?
February 1, 2008 at 1:13 pm
Sweden, I missed that, thanks.
From the report – “We are in a squeeze between supplier pressure to raise prices and customer pressure to reduce prices.” (Chemical Products)
From the Jan 15 PPI report:
Prices for:
Finished goods: -0.1%
Intermediate materials: -0.2%
Crude materials: +1.0%
Also note in today NFP report wages are +0.2%, i.e. below consumer inflation
We clearly have no inflationary pressure at the consumption level whatsoever. The prices will drift lower, this year inflation will be very low.
February 1, 2008 at 1:21 pm
…two more thing.
Have you noticed the decrease in orders in the US, GB and in China export orders?
Exportorders fall from 54,3 to 49,0.
China is the manufactor for the world and the orders are now falling?!?!
Next…
You say the numbers are lagging?
The market started to go up in 2004, last time we had a drop in job?
Doesent that mean the markets should go up?
February 1, 2008 at 1:34 pm
Sorry for my bad english!
February 1, 2008 at 2:42 pm
WTF???
Jan. 31st FRB: H.3 swung to -8.1b non-borrowed reserves, and those are the adjusted figures. And the Jan. 30th TAF shows 50b? Any explanation for the discrepancy between the 50b and the press releases?
February 1, 2008 at 2:43 pm
sorry, here’s the link
http://www.federalreserve.gov/releases/h3/Current/
February 1, 2008 at 2:59 pm
You can’t tell it by looking at the market indexes.
February 1, 2008 at 3:02 pm
On January 18th 2008 Bill Ackman wrote a letter to Moody’s and the S&P regarding the monolines. Here is point #8 of Bill Ackman’s Letter to Rating Agencies Regarding Bond Insurers:
I encourage you to ask yourself the following question while looking at your image in the mirror:
Does a company deserve your highest Triple A rating whose stock price has declined 90%, has cut its dividend, is scrambling to raise capital, completed a partial financing at 14% interest (now trading at a 20% yield one week later), has incurred losses massively in excess of its promised zero-loss expectations wiping out more than half of book value, with Berkshire Hathaway as a new competitor, having lost access to its only liquidity facility, and having concealed material information from the marketplace?
Can this possibly make sense?
http://downgradetheinsurers.wordpress.com
February 1, 2008 at 4:15 pm
jdllmcpa, what is the outstanding TAF balance? Is it 50 bln?
Those numbers look close enough…
February 1, 2008 at 4:19 pm
Sweden, I don’t know where to look for China export orders.
About lagging numbers. No, it doesn’t mean the market has to go up, though it can
Yes, it’s like last time. The market bottomed in late 2002 but jobs continued to deteriorate, especially without much later backward adjustments
February 1, 2008 at 4:44 pm
The recession is getting off to an odd start — the DJIA will likely finish up over 100 pts today.
February 1, 2008 at 6:41 pm
the outstanding TAF balance as of today should be 60b. the loans are for 28 days so the 1-14 & 1-28 loans, at 30b each, should show up as 60b. maybe the 1-30 numbers for the 1-31 H.3 don’t include the 1-28 at 30b but only reflect the the 12-20 @ 20b and the 1-14 @ 30b equaling 50b, but it sure seems like the 12-20 @ 20b should have been repaid and taken off the books by 1-30, even if 1-30 #s are pro forma.
the Fed is basically increasing the revolving line of credit by 10b a month and lowering the interest each time around to boot. it will be interesting to see if Feb TAFs come in above 30b or if March is announced at 40b.
February 2, 2008 at 1:21 pm
theroxylandr wrote:
“Sweden, I don’t know where to look for China export orders.”
FWIW: I recall reading that China’s domestic demand for manufactured goods has been falling since November. I might have read this on CalculatedRisk.
This likely means that China is going to experience some issues with decoupling from exports to the US.
February 2, 2008 at 1:54 pm
Recession, Recession, what Recession? Don’t you believe Bush and the boys? I guess they finally ran out of that brand of cool aid. But don’t fear because they just sold the American public a new version of watered down cool aid with their latest bail out scheme. Maybe everybody should take the $600-$1200 and run with the gold and silver crowd or GE, Halliburton and big Oil
April 30, 2008 at 12:35 pm
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