Economic First Look: Beyond the Employment Report

 | Jan 28, 2012 | 8:30 AM EST
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  • Personal Income and Outlays, 8:30 a.m. (all times EST)


  • Employment Cost Index, 8:30 a.m.
  • S&P Case-Shiller Home Price Index, 9 a.m.
  • Chicago PMI, 9:45 a.m.
  • Consumer Confidence, 10 a.m.


  • Motor Vehicle Sales, released throughout day by each automaker with media tally at end of day
  • Challenger Job Cut Report, 7:30 a.m.
  • ADP Employment Report, 8:15 a.m.
  • Charles Plosser, President of the Philadelphia Fed (non-voter), speaks, 8:30 a.m.
  • ISM Manufacturing Index, 10 a.m.
  • Construction Spending, 10 a.m.
  • EIA Petroleum Status Report, 10:30 a.m.


  • Chain Store Sales, released in the morning by major retailers with media tally following
  • Jobless Claims, 8:30 a.m.
  • Productivity and Costs, 8:30 a.m.
  • Richard Fisher, President of the Dallas Fed (non-voter), speaks, 7:15 p.m.


  • Employment Situation (a.k.a. non-farm payrolls), 8:30 a.m.
  • Factory Orders, 10 a.m.
  • ISM Non-Manufacturing Index, 10 a.m.



While the employment report will dominate investors' attention this week, there are actually quite a number of other economic data points worth noting. Even though many of them are not considered top tier, you can actually learn a lot from data that aren't as widely followed by other investors. Taking a look at some of the details of reports that other investors might ignore can give diligent investors an edge. A couple of these second-tier reports are related to jobs and employment, but they focus on the perspective of employers' wage costs and the output they get from their current workforce. These are the Employment Cost Index on Tuesday and the Productivity and Costs measure on Thursday (both of cover the fourth quarter). They are good resources to examine when considering whether inflation measures might be building in the form of higher wage or benefit costs. I do not believe this to be a likely outcome in the current environment, as I discussed in a recent column on inflation and slack in the labor force. Meanwhile, productivity plus growth of the labor force can tell you the growth potential of the economy, which will put the GDP report into perspective. How far above or below potential we are will help determine, in part, whether we might see inflation pressures building or subsiding, respectively.

The reports can also hint as to how much hiring employers might do beyond keeping up with growth of the labor force. If we see slowing productivity gains relative to changes in output, employers might need to hire more to meet output demands. Conversely, the more output employers get from increased productivity, the less of a need there is to hire more people. Continuing that theme of workers' incomes and hiring trends is Friday's jobs report. I am not all that interested in the headline number of jobs created; instead, I want to know what industries are hiring and how much they are paying. I reported last month that many of the jobs created were in low-paying industries, though many investors were excited to see that 200,000 jobs were created. Instead, I was more concerned by the lack of wage growth more than I was excited to see that retail and food service hired oodles of people.

And remember those 42,000 new courier jobs I noted in last month's column on the employment report? Well, many of them are seasonal, and the Bureau of Labor Statistics (BLS) may have trouble accounting for the seasonality of those jobs given the ongoing shift toward Internet shopping and shipping, especially during the holiday season. So, those jobs may well disappear in this month's report, and that means that payroll growth could possibly see a subtraction somewhere around 40,000 jobs or so.

I also reported in my column on the GDP report on Friday that 42% of the gains in last month's payroll report can be attributed in part to the (temporary) inventory build we saw in the fourth quarter. I doubt job growth in those sectors will continue over the long term -- and they may even reverse. Where else might we see job growth this month? In the Job Openings and Labor Turnover Survey (JOLTS) report published by the Bureau of Labor Statistics, we see that job openings in November totaled 3.161 million, which was down from the 3.224 million the month before.

The November data are the most recent, but it is also the right period to use for this week's jobs report, as it takes a month or two to fill openings. Most individual industry groups had little change in job openings from the month before, though I note that the industry group with the highest pay -- professional and business services -- saw the number of job openings fall from 576,000 to 517,000. Meanwhile, those on the opposite end of the income spectrum with the lowest wages, including leisure, accommodation and food services, saw job openings increase by 55,000 -- when lumping those groups together. This is continuing a trend we saw last month of job growth concentrated at the low wage end of the spectrum. So, when you consider that job openings dipped slightly, and the ones we do see are in low-paying industries, that doesn't portend much hiring and income growth.

The mitigating factor is that the number of people collecting regular unemployment benefits has dropped a tad during the month of January, from 3.647 million on Dec. 31 to 3.554 million on Jan. 14. For all unemployment aid programs, such as extended benefits, claims dropped by 188,000 to reach 7.368 million, but these data are reported with a lag and data are only available as of Jan. 7. While new unemployment claims are still elevated, the fact that a bit fewer people are continuing to receive benefits could mean that people are finding jobs. Or, perhaps their benefits expired, or they may no longer qualify for benefits if they stopped looking for work (such as if they go back to school). The report does not spell out how many people's benefits expired vs. how many people stopped continued claims for other reasons. These data on unemployment claims and job openings can only tell us so much, and they are imperfect measures of handicapping the actual results for this week's employment report.

I will also note that most economists' forecasts for a particular number usually don't hit the mark. Based on the data presented, I doubt that this week's report will provide investors (and the unemployed) with any level of excitement that our country has definitively reached a level of growth in well-paying jobs to rehire the 23 million Americans who are either unemployed, underemployed or have given up entirely.

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