NFP

by Larry Levin

Friday's Non-Farm Payroll (NFP) report came out pretty much inline with market expectations. If I wanted to be critical I could say that it was worse than expected, which is true, but not by much. Most of Wall Street had expected the number to show a gain of about 180,000 (Goldman Sachs thought 200,000) and the actual number was +162,000. Considering that it was finally north of +150,000 it must be thought of as a good data point.

And the fairly good "overall" reported number is surely all you will hear of from the lame stream media. It is rarely mentioned, if ever, that job gains of +300,000 per month are needed simply to keep up with population growth. What's inside the report follows:

1) Given the population growth job needs, the r
2) The official unemployment rate held steady at 9.7%.
3) The unofficial (real) unemployment rate (U6) is 16.9%.
4) Involuntary part-time employment increased by 738,000 workers in two months.
5) The number of long-term unemployed (those jobless for 27 weeks and over) increased by 414,000 over the month to 6.5 million.
6) 72,000 jobs this year are from census hiring. Those jobs will vanish by midsummer and they'll all collect unemployment compensation.
7) 100,000 of the 162,000 job gains was a guess due to the snow storms in the East.

From the Household Survey:
1) The number of unemployed persons was little changed at 15.0 million, and the unemployment rate remained at 9.7 percent.
2) The number of long-term unemployed increased by 414,000 over the month to 6.5 million.
3) In March, 44.1 percent of unemployed persons were jobless for 27 weeks or more.
4) The civilian labor force participation rate (64.9 percent) and the employment-population ratio (58.6 percent) continued to edge up in March.
5) The number of persons working part time for economic reasons increased to 9.1 million in March. (Was 8.3 million in Jan)

And finally we have the following from Goldman Sachs; even The Squid was a little disappointed.

KEY NUMBERS:
Nonfarm payrolls +162k in Mar vs. GS +200k, median forecast +184k.
Unemployment rate 9.7% in Mar vs. GS 9.6%, median forecast 9.7%.
Average hourly earnings -0.1% in Mar (mom, +1.8% yoy) vs. GS +0.1%, median forecast +0.2%.

MAIN POINTS:
1. The 162k increase in nonfarm payrolls reported for March looks like it is mainly due to the hiring of temporary workers for the census (+48k) and weather effects. While the latter can only be estimated, our +100k figure looks right if not a bit low based on three observations: (a) an increase in construction payrolls (+15k vs declines of 60k in Jan and 59k in Feb), (b) a full recovery from Feb setbacks in workweeks, and (c) a sharp swing down in the number of people reporting themselves as out of work due to weather (to 135k in Mar from 1.03 million in Feb, which statistically would be consistent with a weather effect of more than 100k).

2. Two other aspects of this report are firmer. First, payroll figures for Jan and Feb were revised up, by a cumulative 62k. Second, the survey of households reported a third consecutive large increase in employment, of 264k (cumulative increase now 1.1 million). It is not unusual for the household survey to show firmer recovery in the early stages of an economic recovery as net business formation picks up more rapidly than the payroll figures may anticipate.

3. Despite the firmer tone of the household survey, the unemployment rate remained at 9.7%, as labor force participation edged up for a second consecutive month. In fact, on an unrounded basis the unemployment rate came just short of rising 0.1 (9.749%). Meanwhile, the broadest "U6" measure of underemployment edged up 0.1 point, to 16.9%, underscoring the fact that there is still quite a bit of unused capacity in the labor market, both in terms of people who are working part time because they cannot find full-time work and in those who have not reentered the labor force. Consistent with this, average hourly earnings continue to weaken, slipping 0.1% on the month and dragging the year-to-year trend down to 1.8% (despite a small upward revision to the prior month).

4. With the recovery of workweeks in March, the index of total hours worked rose 0.4%. For the quarter as a whole, hours worked were up 2.1% at an annual rate. With the "bean count" for real GDP still fairly consistent with our estimate of a 2.5% annualized increase, the implication is that productivity gains have diminished sharply.



Previous Day's Trading Room Results:

Trade Date: 4/2/10

E-Mini S&P Trades*
(before fees and commissions):

1) No "Secrets" trades filled today.

2) Algorithm positions (7)

3) "Reading the Tape" positions (3) ...combined Secret's, Algo, & "Reading the Tape" total...+1.50



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