It’s almost funny…
Just yesterday, analysts thought we’d see payrolls add some 175,000 jobs… and we got maybe a tenth of that. Others upped their June jobs forecast to 10,000 or more in recent days because of the very few jobs added in May.
My sides hurt from laughing. And my head hurts from banging it against the wall out of frustration.
How do these guys have jobs? And competent people are struggling?
When companies aren’t even hiring temps, there’s no way payrolls will add that many jobs. It ain’t gonna happen.
According to Barron’s:
“Economists are sifting through today’s June jobs report in the hopes of finding some bright spot: there aren’t any. The June employment number is being described as “horrible,” seriously ugly,” and from one colorful strategist: “Ewwwwww that smell…”
“Everything about that report stinks,” writes David Zervos, the managing director of global fixed income strategy at Jefferies & Co. “[T]he ‘risk on’ crowd will have to lick some wounds here so it could get a little messy on a Friday in July. There is no way to spin anything positive out of what was just released, except that we can look forward to a lower base for the next report. It will be interesting to hear if Obama can find something to cheer about. Good luck trading!”
Citi analyst Wiliam Katz notes that today’s report makes any chance of interest rate hikes in the near future virtually nonexistent. “The broadest implication is that investors can likely say goodbye to any near-term rate leverage plays as expectations for short-term rate hikes continue to dissipate.” In his coverage universe (asset managers) Katz writes that “we see online brokers broadly at risk, followed by equity & money market centric traditional asset managers.”
The report also bodes poorly for housing, as if that sector needed any more dour news.
“The disappointing news on the labor front will only serve to further damage already depressed consumer confidence and the demand for housing. While home prices have stabilized recently going in to the spring/summer selling season, this report bodes poorly for house price expectations,” writes Doug Duncan, the chief economist at Fannie Mae.
And people want us to believe housing will get better, near-term…. Ha!
You’ve got to feel for Joe LaVorgna, though. His +175,000 jobs growth forecast was only off 872%. That’s got to hurt. Here’s more on Joe from Zero Hedge.
“Joe LaVorgna, who yesterday raised his NFP estimate from 100,000 to 175,000 was off only by a factor of 972%. Here is his, uh, “explanation.”
There was very little positive news in the June employment report as job gains were paltry, the unemployment rate rose, the work week declined and average hourly earnings were unchanged. Headline payrolls rose just +18k following downward revisions to the prior two months: April was lowered to +217k from +232k and May was reduced to +25k from +54k as previously reported. The weakness was broad?based within the underlying categories. In the goods sector, construction shed ?9k jobs versus ?4k previously and manufacturing rose just +6k compared to ?2k in May. Private service?sector hiring also slowed significantly (+53k vs. +70k previously), as net layoffs occurred in financial services (?15k vs. +14k), temp workers (?12k vs. ?2k) and auto dealerships (?1k vs. +4k). Government layoffs continued (?39k vs. ?48k).
The unemployment rate backed up another tenth to 9.2% as household unemployment was unchanged but household employment declined by ?445k (vs. +105k previously). The length of the workweek declined a tenth to 34.3 hours and average hourly earnings were unchanged in the month. We are hard pressed to find any redeeming qualities of this report, which did not reflect the improvement in the manufacturing ISM or the ADP data. If the soft?patch in hiring does not improve in July, the outlook for second half of the year will diminish.
But, but, but Joe…. This is not at all what you predicted yesterday:
As we warned in yesterday’s note, our June payroll forecast was susceptible to revision pending the results of the ADP report given the recent improvement in that series’ forecasting track record. The ADP results were much better than expected, so we are raising our payroll forecast. ADP employment rose by +157k in June following a modest downward revision (-2k) to May. Over the last four months, the average miss on ADP has been just 43k, but these misses have all been in the same direction, to the low side. Thus, if we assume a similar forecast miss, this is consistent with a 200k increase in private payrolls. With the public sector shedding on average -25k jobs per month, headline nonfarm payrolls should come in at +175k. Previously, we were forecasting +100k. Our forecast of a one tenth decline in the unemployment rate (to 9.0%) remains intact.
Joe: please, tell us… We beg you… What is the secret? How do you have the absolutely worst forecasting record in the history of Wall Street and still keep your job? How do you do it? If you trademark it you would make gobs more money than using the excel goal seek function month after month with results so wrong that it boggles the mind.
Seriously.”
