June 3, 2011

ISM Non Manufacturing Index Improves, But the ‘Cloud Economy’ Isn’t Translating Purported Expansion Into Enough Jobs

Filed under: Economy,Taxes & Government — Tom @ 1:50 pm

This in no way remotely offsets the absolutely awful employment news, but it is a nice and rare upside move:

Economic activity in the non-manufacturing sector grew in May for the 18th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

“The NMI registered 54.6 percent in May, 1.8 percentage points higher than the 52.8 percent registered in April, and indicating continued growth at a faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased 0.1 percentage point to 53.6 percent, reflecting growth for the 22nd consecutive month, but at a slightly slower rate than in April. The New Orders Index increased by 4.1 percentage points to 56.8 percent. The Employment Index increased 2.1 percentage points to 54 percent, indicating growth in employment for the ninth consecutive month and at a faster rate. The Prices Index decreased 0.5 percentage point to 69.6 percent, indicating that prices increased at a slightly slower rate in May when compared to April. According to the NMI, 16 non-manufacturing industries reported growth in May. Respondents’ comments are mostly positive about overall business conditions. There is a sentiment that there is a degree of stability in the economy; however, a continued concern exists over fuel costs and various volatile commodities.”

So the roughly 85% of the economy covered in the Institute for Supply Management’s report is expanding (any ready above 50% means that), and at a bit faster pace than it was in May. Too bad it’s not translating into consistent, meaningful job growth — or consistent, beyond-anemic economic growth.

Daniel Henninger explained why in a stellar Wall Street Journal column yesterday, and also showed why Barack Obama personally and inarguably owns the economy’s performance (bolds are mine):

Obama’s Cloud Economy
The economy is flying without instruments because of the White House’s policy choices.

You just know the American economy is out there somewhere. If only someone knew which buttons to push to retrieve it from the storage cloud.

… (In) his hyperpartisan deficit speech at George Washington University in April … the president contributed nothing. Instead he dumped ridicule and derision on the Republican leadership seated before him. With that speech, Mr. Obama kicked off his 2012 presidential campaign, and in so doing politicized the economy.

The timing was not good. Whether it’s this week’s report that consumer confidence has fallen to a six-month low or anecdotal conversation (“So what do you think happens when QE2 ends?”), the sense grows that people are starting to freak out over the economy—over persistently high unemployment and persistently weak growth.

With the U.S. economy, a Lazarus rising is always possible (or was). But the informed betting is going the other way. Private forecasters have reduced their estimates for economic growth the rest of the year well below the 3%-plus the Federal Reserve predicted in April. The Fed’s 2012 growth forecast runs as high as 4.2%. They must be using high-powered telescopes.

It’s ironic indeed that Barack Obama, in a slap at his predecessor, routinely said that his policies would be “smart” this or “smart” that. A “smart” economy would at least have the virtue of clarity for the purposes of planning and capital investment. The Obama economy does not. Economic decision-makers—from 401(k) investors to Fortune 500 CFOs—are flying instrument-less through the clouds because that is where the policy choices made by this White House have left them.

… What evidence do liberals cite for their vestigial faith that (the health care and finance industries) employing millions of people in complex daily activities, can grow long term at greater than 3% from beneath the morass of Dodd-Frank and the Obama health-care law?

The housing sector, a monumental and intractable mess, chokes the economy. No matter. The president allowed (or told) “adviser” Elizabeth Warren of the new Consumer Financial Protection Bureau to engulf banks and mortgage servicers in negotiations over a complex regulatory scheme whose goal, literally, is to fix their “business model.”

The White House now says the free trade agreements with Colombia, Panama and South Korea will be delayed absent payouts of more money for “trade adjustment assistance.” Ergo, the past two years of uncertainty for trade commitments will be extended.

It is sometimes unfair to tag presidents with blame for an underperforming economy. Not this time. This president made conscious policy choices during a deep recession to reorder vast swaths of American industry. Strong-performing economies need clarity. Barack Obama has given ours indecision stretching to the horizon. And economic growth, like a long gray day, sits still below 3%.

Read the whole thing.

The question at the moment seems to be how much below 3%, “stretching to the horizon,” economic growth will be. We know for sure that employment won’t grow by what’s needed if growth really end up being that anemic.

How Bad Is It? Absolutely Awful, and Far Worse Than BLS’s Seasonally Adjusted Numbers are Telling Us (UPDATES: Fantasy-Based and Reality-Based Reactions)

Filed under: Economy,MSM Biz/Other Ignorance,Taxes & Government — Tom @ 11:35 am

SAandNSAjobsAddsMay01toMay11Today’s Employment Situation Summary is so much worse than it appears from the seasonally adjusted (SA) numbers that everyone will report that I need to dedicate a post to how horrid the not seasonally adjusted (NSA) numbers (i.e., the ones that reflect what’s actually happening on the ground) really are.

The NSA and SA results from May 2001 through May 2011 are at the top right.

Concentrating strictly on the NSA numbers for a moment:

  • The overall result of 682,000 jobs added is 38% less than last year’s 1,103,000. Even after taking out about 400,000 census workers from last year’s figure, there’s no improvement. Does anyone remember May of last year being a great month for the economy? No? That’s because it wasn’t; second-quarter Gross Domestic Product (GDP) growth was a measly annualized 1.7%. As bad as last year’s second quarter was, this year’s is shaping up as worse, at least in job creation. A worse second quarter for GDP shouldn’t surprise anyone.
  • Additionally, that +682K overall result is less than every year in the table except 2008 and 2009. Going back further (not pictured), it’s worse than every other year since 1983, except for 1991′s +681K.
  • The private sector’s 723,000 jobs added in May, while better than the overall number, is still less than the five strong Mays under Bush 43 (2003-2007), which were almost universally and constantly derided as mediocre by the establishment press.

Now let’s look at the NSA-SA translations. In terms of the total employment, I’ll carry forward what I wrote earlier this morning:

  • In May 2007, 942K in NSA additions translated to +141K SA.
  • In May 2008, 570K in NSA additions translated to -233K SA.
  • Interpolating between the two (I know that’s not how seasonalizing works, but when you don’t have the factors, you try to approximate), May 2011′s 682K in NSA additions might have been expected to translate into about 120K jobs lost.
  • But instead, the reported SA result was +54K, a positive 174K difference.

Repeating the same exercise with the private sector:

  • In May 2007, 925K NSA additions translated to +111K SA.
  • In May 2008, 538K NSA additions translated to -240K SA.
  • Interpolating between the two, May 2011′s 723K in NSA additions might have been expected to translate into about 70K jobs lost.
  • But instead, the reported SA result was +83K, a positive 153K difference.

Beyond that, the overall SA result of +54K in May 2011 is better than May 2001, 2002, 2003, and 2006, even though each of those years saw more jobs added on the ground. Similarly, the private-sector’s +83K for May 2011 is way above May 2003 and 2006, even though NSA additions in those two years were much higher.

Keep in mind that I’m not questioning BLS’s methodology, and I’m not even saying that their SA numbers are “wrong.” I am saying that when you have almost three years of atypical and wildly fluctuating results (i.e., ever since the recession as normal people define it began in July 2008, and continuing since then, because NSA results obtained have consistently not reflected what goes on in a normal economy), seasonalization leads to answers that should NOT be seen and the be-all, end-all reflection of what really happened. Yet that’s all that anyone ever hears. That is not how it should be.

There is no doubt that the job market is far worse than today’s already-bad reported seasonally adjusted results indicate. Team Obama, Nancy Pelosi, Harry Reid, Washington’s Beltway Democrats have no one to blame but themselves for what their POR (Pelosi-Obama-Reid) Economy has wrought.

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UPDATE: From the land of sheer fantasy known as the White House –

In a taste of what Obama is expected to argue, Austan Goolsbee, chairman of the Council of Economic Advisors, called the jobless numbers a bump on the road to recovery and defended the administration’s policies.

“There are always bumps on the road to recovery, but the overall trajectory of the economy has improved dramatically over the past two years,” Goolsbee said in a statement.

My a**, Austan.

Also, from Weasel Zippers: Harry Reid is “encouraged that the private sector is continuing to grow and add jobs.”

UPDATE 2: Reality-based reactions –

  • On the home page at Hot Air — “This is not the recovery you were looking for.”
  • Michael Walsh at the New York Post — “Two years into the Obama administration, the country’s finances are a looming calamity. An unemployment rate of more than 8 percent has become the new normal, and even that understates real unemployment, because so many Americans have simply left the job market.”
  • At Zero Hedge — “People Who Want A Job Now, Average Duration Of Unemployment Both Hit All Time Highs”
  • A brilliant point from Jeffrey Carter at Points and Figures (HT Instapundit) — “The effects of the crony capitalism economy are being seen in unemployment numbers. Obamacare, Dodd-Frank, huge unchecked runaway bureaucracy. It has created ‘The Great Uncertainty.’”

May 2011 Employment Situation Summary (060311): 9.1% Unemployment, 54K SA Job Adds, 15K after Prior-Month Revisions; NSA Numbers Show That It’s Even Worse

Filed under: Economy,Taxes & Government — Tom @ 8:07 am

Note: Be sure to check out how the not seasonally adjusted (NSA) results are even worse than the seasonally adjusted (SA) numbers indicate (“Further Benchmarking Update”).

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Report Run-up

Before this week, this morning’s employment report from the Bureau of Labor Statistics — if you believe the people who have been “unexpectedly” getting so many downside surprises since the POR (Pelosi-Obama-Reid) Economy began — was supposed to be lukewarm but tolerable: about 175,000 seasonally adjusted jobs added and the unemployment rate basically staying the same or dropping a bit.

Then came a flurry of unimpressive reports:

  • The Institute for Supply Management’s Manufacturing Index dropped from torrid to decently expansionary (60.4% to 53.5%), the largest single-month drop since January 1984.
  • ADP’s employment report came in with 38,000 seasonally adjusted private-sector jobs added in May.
  • May car sales dropped compared to both April 2011 and May 2010. Five of the Big 6 suffered year-over-year sales declines.
  • Chain retail sales were mostly disappointing. (Anecdotal evidence: Yours truly has seen really slow electronics store traffic during the past three weekends.)
  • Weekly initial unemployment claims seem stuck indefinitely at well above 400,000.
  • The Conference Board’s consumer confidence index plunged.

That’s by no means all of the bad news.

Predictions

As a result, the digital erasers have seen heavy use during the past 48 hours, and there isn’t much of a consensus on what BLS’s numbers will be. What follows are a few predictions, all as of early this morning.

Christopher Rugaber at the Associated Press doesn’t really have a firm jobs number: “Some economists now forecast that employers added fewer than 100,000 jobs last month, which would be sharp downturn from the average gain of 230,000 in February, March and April. Other analysts aren’t as dramatic — Goldman Sachs reduced its estimate to 100,000 from 150,000 — but if accurate, they would still suggest a much weaker job market.” He also cites “a survey by FactSet” predicting that the unemployment rate will drop to 8.9% from 9.0%.

At Reuters — “Nonfarm payrolls likely increased 150,000 last month, according to a Reuters survey of economists.”

Bloomberg — “Payrolls rose by 165,000, the smallest gain in four months, after increasing 244,000 in April, according to the median of 89 estimates in a Bloomberg News survey. The jobless rate may have partially reversed April’s advance, falling to 8.9 percent from 9 percent.”

Benchmarking

As most readers here know, yours truly likes to look at the real job-addition numbers, i.e., the not seasonally adjusted (NSA) figures, because the seasonalizing process sometimes gets weird when, as has been the case during the past three years, the numbers have been so atypical and volatile.

So let’s look. NSA results are on the left, seasonally adjusted (SA) results are on the right:

OverallAndPrivateJobAddsJan01toApr11

Recalling that last year’s overall number was skewed by Census hiring, May’s overall job adds need to be at least 950,000 both overall and in the private sector to be considered acceptable (not great — acceptable), regardless of what comes out in the land of seasonal adjustments.

Another factor to watch: How much of the NSA increase comes from the Birth/Death model, which estimates invisible net new job creation at businesses whose births and deaths BLS hasn’t yet detected. May is typically a month with a high Birth/Death number; last year’s was an in my opinion absurd +192,000. (Update: Maybe not so absurd; see the “Birth/Death Update” below.)

The past two months haven’t been too bad. A repeat performance seems unlikely.

We’ll see here at 8:30.

While we’re waiting (just to annoy lefties): In post-recession month 23 when Ronald Reagan was president, the economy added 241,000 jobs, bringing the total of post-recession job additions to over 5.8 million. To replicate that performance, the Obama economy would need to report about 350,000 additional jobs today while adding 8 million jobs since the recession. Before today’s result, the Obama economy total is +535,000.

Okay, here it is — and it’s really not good:

Nonfarm payroll employment changed little (+54,000) in May, and the unemployment rate was essentially unchanged at 9.1 percent, the U.S. Bureau of Labor Statistics reported today. Job gains continued in professional and business services, health care, and mining. Employment levels in other major private-sector industries were little changed, and local government employment continued to decline.

… The number of unemployed persons (13.9 million) and the unemployment rate (9.1 percent) were essentially unchanged in May. The labor force, at 153.7 million, was little changed over the month.

… In May, the number of long-term unemployed (those jobless for 27 weeks and over) increased by 361,000 to 6.2 million; their share of unemployment increased to 45.1 percent.

… Total nonfarm payroll employment was little changed in May (+54,000), following gains that averaged 220,000 in the prior 3 months. Private-sector employment continued to trend up (+83,000), although by a much smaller amount than the average for the prior 3 months (+244,000).

… The change in total nonfarm payroll employment for March was revised from +221,000 to +194,000, and the change for April was revised from +244,000 to +232,000.

Incorporating prior-month revisions, there were only 15,000 more Americans working in May than were thought to be working in April (+54K for May minus March’s 27K and April’s 12K downward revisions). Yikes.

Benchmarking update: As would be expected, the NSA job additions were well short of what was needed — 682,000 overall, and 723,000 in the private sector.

Further benchmarking update: Team Obama caught a HUGE break in the seasonalizing of the NSA data just noted. Focusing on the overall numbers in the tables above:

  • In May 2007, 942K in NSA additions translated to +141K SA.
  • In May 2008, 570K in NSA additions translated to -233k SA.
  • Interpolating between the two (I know that’s not how seasonalizing works, but when you don’t have the factors, you try to approximate), May 2011′s 682K in NSA additions might have been expected to translate to about -120K SA.
  • But instead, the reported SA result was +54K, a positive 174K difference. Wow.

A similar exercise done on the private-sector numbers would tell you that its +723K NSA figure might have have resulted in -70K SA instead of the reported +83K. That’s a difference of 153K, demonstrating that Team Obama also caught a huge private-sector break.

I’m not going to second-guess BLS’s seasonalizing (well, I will a little, because I know that they put more weight on the previous year, which in this case was distorted by the census, than they do on the four other preceding years they consider in their calculations). The methodology is what it is, and I assume it hasn’t changed.

But I am going to say that the May 2011 job-market performance was much worse than the SA translations make it appear. This is a prime example of why journalists who fail to analyze the NSA numbers (i.e., almost all of them) aren’t doing their jobs.

Birth/Death Update: Birth/Death is showing +206K in May. That would appear to be ridiculous, but in the only comparable data I could find, BLS predicted 185,000 net births in May 2009 and the final result was 172,000 (go to Page 21 at this PDF link).

Giving BLS the benefit of the doubt on this (it’s a lot closer than I expected), even a 13K miss would further reduce an already weak May 2011 number, and the average 24K miss during the year disclosed at the link would bring it down even further. After seasonalizing and including the prior-month downward revisions, you’re pretty much at something barely above zero.

Bottom line, as usual:Rebound? What Rebound?

Positivity: Pope Benedict backs changes at Caritas

Filed under: Positivity — Tom @ 6:00 am

Note: In August 2009, BizzyBlog guest blogger Carol McKinley contributed an excellent column (“Lead, Follow, or Get Out of the Way) which, among other things, strongly criticized Caritas Christi for appearing to be on the verge of willingly referring pregnant women to abortion service providers in Massachusetts. Fortunately, vehement lay protest derailed that effort.

Today’s Positivity points to a hopeful sign that stronger leadership that a reorganization of Caritas, combined with perhaps a bit more oversight from the Vatican, will prevent that sort of near-miss from ever coming close to occurring again.

From Vatican City:

May 27, 2011 / 06:55 pm

Pope Benedict XVI has given his backing to the reorganization of the international Catholic charity Caritas, which will see the organization work more closely under Vatican guidance in a bid to enhance its Catholic identity.

“Since Caritas Internationalis has a universal profile and is canonically a public juridical person, the Holy See is also responsible for following its activity and exercising oversight to ensure that its humanitarian and charitable activity, and the content of its documents, are completely in accord with the Apostolic See and the Church’s Magisterium,” the Pope told representatives of the organization at an audience in the Vatican May 27.

This week has seen 165 national affiliates of Caritas gather in Rome for the organizations general assembly. It’s been a week of turbulence and change.

In his opening address to the Caritas general assembly on May 22, Cardinal Robert Sarah of the Pontifical Council Cor Unum – the Vatican body responsible for Caritas – hinted at concerns over the charity’s lack of Catholic identity. Interestingly, four of Cardinal Sarah’s key concerns were almost identically echoed by the Pope today.

Just as Cardinal Sarah said in his opening address for the charity’s general assembly, Pope Benedict stated today that “Caritas Internationalis differs from other social agencies in that it is ecclesial; it shares in the mission of the Church.”

“This is what the Popes have always wanted and this is what your General Assembly is called forcefully to re-affirm,” the Pope said May 27.

The way Caritas carries out its work is different from humanitarian or philanthropic organizations, the Pope continued. “For us Christians, God himself is the source of charity; and charity is understood not merely as generic benevolence but as self-giving, even to the sacrifice of one’s life for others in imitation of the example of Jesus Christ.”

Pope Benedict built upon the importance of Caritas having a “transcendent foundation” that appreciates man’s eternal destiny, saying that without that solid mooring charities “risk falling prey to harmful ideologies.” …

Go here for the rest of the story.