My take on the Employment/Unemployment

My take on the Employment/Unemployment (numbers to be released on Friday for December) The bullish traders off an expected hot jobs number could get neutered

Consensus forecasts have been running very hot since most into last week were expecting 135,000-150,000 December total nonfarm payroll gain of versus last month's 39,000 jobs gain reported for November, with unemployment holding at November's level of 9.8%.

As of today the vast number of talking-buttheads being pranced about on the various bubblevision networks have ratcheted up their expectations as the expectations have now moved upward, many now are expecting 250,000 or 295,000 jobs gain with expectations for the headline unemployment dropping to 9.60-9.70%.....they may even strengthen further, given the hype surrounding this morning's ADP estimate of private payrolls gaining a much-stronger-than-expected 297,000 in December. I have not found, however, much predictive ability in the ADP estimates versus the formal Bureau of Labor Statistics (BLS) reporting, but those on the financial cheering leading networks sure have!

Despite all the media hype today, I still expect the non-farm payroll numbers to be significantly weaker I'm expecting a reading of 22,000 to 30,000 than consensus, especially the new consensus which I believe is embracing (at least temporarily) giddy, euphoric expectations of a Fed led stellar developing economic recovery. I believe that those wearing such rose colored glasses during the first-quarter of 2011, will get a huge dose of reality and they will shift rapidly back towards a double-dip recession scenario that I have forecasted started in 2010/Q3.

Please keep in mind that the annual payroll benchmark revision (a large downside revision somewhat has started to be factored in by the BLS….[from BLS in October; The benchmark process annually revises the payroll survey’s sample-based employment estimates to incorporate employment counts derived primarily from unemployment insurance tax reports. Preliminary tabulations indicate that the estimate of total nonfarm payroll employment for March 2010 will require a downward revision of approximately 366,000. The average of the absolute values of the benchmark revisions over the prior 10 years is three-tenths of one percent) is due with the January 2011 payroll release on February 4th, the BLS likely will massage the initial reporting of the December payroll number so that it does not show significant month-to-month revision in the benchmark reporting. If so, that will add some downside pressure to the December monthly payroll number.

Monday's ISM Manufacturing survey on Employment
The ISM's purchasing manager's survey (manufacturing) showed the December employment diffusion index dropped to 55.7 versus 57.5 in November…this December reading was the lowest level since March 2010; but you would not have heard that on the various bubblevision networks, as it wasn't a positive ISM's data point!

• Of the 18 manufacturing industries, (9) reported growth in employment in December in the following order: Apparel, Leather & Allied Products; Primary Metals; Fabricated Metal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components; and Paper Products.
• The (5) industries reporting a decrease in employment during December are: Nonmetallic Mineral Products; Furniture & Related Products; Miscellaneous Manufacturing; Printing & Related Support Activities; and Textile Mills.

The Chicago ISM report released on 12/30/2010 we saw comments that stated employee turnover is starting to increase, this along with continued downsizing and increased outsourcing is driving consultant hiring. The lending market slowly thawing but only for strong (financially) borrowers, moderate to weaker borrowers are still finding it nearly impossible to find a competitive source of reliable funding.

Today's (Wednesday) ISM Services survey on Employment
Employment activity in the non-manufacturing sectors was still a tad above 50% so it's technically growing in December, as ISM's Non-Manufacturing Employment Index registered 50.5%. This reflects a decrease of 2.2 percentage points when compared to the 52.7% registered in November…we saw that (9) industries reported increased employment, (7) industries reported decreased employment, and (2) industries reported unchanged employment compared to November.
Comments from respondents include: "We had a small reduction in force to reduce operating costs" and "We've added approximately 3% to our workforce for seasonal (part-time) work."

• The industries reporting an increase in employment in December were Mining; Retail Trade; Information; Other Services; Utilities; Finance & Insurance; Transportation & Warehousing; Professional, Scientific & Technical Services; and Educational Services.
• The industries reporting a reduction in employment in December are: Construction; Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Accommodation & Food Services; Health Care & Social Assistance; Public Administration; and Wholesale Trade.

Today's Lay-off announcements…..there were 32,004 layoff intentions announced in December, down from 48,777 in November and from the 45,094 job cuts announced in 12/2009, according to job placement firm Challenger, Gray and Christmas, as stated in a report released today. The December layoff total was the lowest reported since June 2000, when there were 17,241 layoffs reported. Layoffs totaled 529,973 in the current year, well below the 1,288,030 layoffs reported in 2009 and the lowest yearly total since the 434,350 layoffs reported in 1997 (most firms have cut to the bone, and many are still outsourcing abroad)
Layoffs in December were led by the retail sector, which reported 4,937 job reductions in the month (wow an outlier, as seasonally retail hires…pharmaceutical layoffs and government layoffs were closely behind. "The downsizing phase of the recession really came to an end in 2009," said John Challenger, CEO of Challenger, Gray & Christmas. "Job cutting fell dramatically in the second half of that year," he added. "The pace of downsizing continued to slow in 2010 to levels we have not seen since before the 2001 recession." However, Challenger cautioned that the government sector remains in jeopardy. "Unfortunately, the government sector is likely to see heavy job cuts again in 2011 as the budget shortfalls that existed in 2010 continue well into the new year," he said, adding that "the sector could see an increase in job cuts in 2011 as state and local agencies, which saw the heaviest downsizing last year, are joined by federal agencies under increasing pressure from a Congress determined to cut spending."

• Now what you didn't hear on the bubblevision networks today….John Challenger stated thathiring intentions dropped significantly to 10,575 in December from 26,012 in November and 35,592 in December 2009. December hiring plans were led by the automotive sector.

Private-sector employment increased by 297,000 from November to December on a seasonally adjusted basis, according to the latest ADP National Employment Report® released on Wednesday morning. The estimated change of employment from October to November was revised down but only slightly, from the previously reported increase of 93,000 to an increase of 92,000 (remember last month the non-farm payroll numbers came in at 39,000 jobs created).

This month’s ADP National Employment Report suggests nonfarm private employment grew very strongly in December, at a pace well above what is usually associated with a declining unemployment rate. After a mid-year pause, employment seems to have accelerated as indicated by September’s employment gain of 29,000, October’s gain of 79,000, November’s gain of 92,000 and December’s gain of 297,000. Strength was also evident within all major industries and every size business tracked in the ADP Report.

According to the ADP Report, employment in the service-providing sector rose by 270,000 in December, the eleventh consecutive monthly gain and the largest monthly increase in the history of the report.

• Employment in the goods-producing sector rose 27,000, the second consecutive monthly gain and the largest since February 2006.
• Manufacturing employment rose 23,000, also the second consecutive monthly gain.
• Employment among large businesses, defined as those with 500 or more workers, increased by 36,000
• While employment among medium-size businesses, defined as those with between 50 and 499 workers, increased by 144,000.
• Employment among small-size businesses, defined as those with fewer than 50 workers, increased by 117,000.* (*All size data included in the ADP National Employment Report is based on size of payroll. In some cases, small and medium-size payrolls belong to businesses employing more workers than indicated by the size grouping.)
• Construction employment was unchanged in December, ending continuous monthly declines since June 2007. The decline in Construction employment, since its peak in January 2007, is 2,306,000.
• Employment in the financial services sector declined 8,000 in December.

I am watching this massive growing divergence…..in initial claims data, pro forma vs. real
I'm becoming more concerned about the non-farm payroll report to be released on 01/07/2011 than before (especially for my blinded bullish friends, who are of the belief that the B-52-mad-money printer)....the seasonally manipulated date for initial claims is more divergent than I have seen it in a very long time, the numbers for November (5-week month) came in with a divergence when compared to the number reported as so called seasonally adjusted (2,174,000/5 = 434,800 claims vs. actual reported claims of (2,149,368/5 = 429,873); meaning that the seasonally adjusted totals when compared to the actual totals showed a larger number of actions over 5-weeks of 24,632!
And on 12/03/2010 we saw that the non-farm-payroll release showed….(The unemployment rate increased to 9.8% in November from 9.6%, and nonfarm payroll employment was little changed (we only saw an increase of 39,000 jobs), according to the BLS.)
And you can see from the data these past 5-weeks in December just the opposite is happening this month due to Labor-department fuzzy-math accounting as now as after just 4-weeks of data we have a huge negative reversal as the seasonal numbers vs. actual are 2,058,000 (average 411,600) vs. 2,662,981 (average 532,577) or a difference of 604,981 this month already this is a very huge divergence, and seasonality will not cover this type of direct manipulation
WEEK of 12/04/2010 (161,007 negative tally, from actual vs. pro-forma seasonally adjusted vs. real

• In the week ending 12/04, the seasonally adjusted initial claims number came in at 421,000, a decrease of 17,000 from the previous week's revised figure of 438,000.
• The advance number of actual initial claims, unadjusted, totaled 582,007 the week ending 12/04.

WEEK of 12/11/2010 (66,284 negative tally, from actual vs. pro-forma seasonally adjusted vs. real

• In the week ending 12/11, the seasonally adjusted initial claims number was 420,000, a decrease of 3,000 from the previous week's upwardly revised figure of 423,000.
• The advance number of actual initial claims unadjusted, totaled 486,284 in the week ending 12/11,

WEEK of 12/18/2010 (75,587 negative tally, from actual vs. pro-forma seasonally adjusted vs. real

• In the week ending 12/18, the seasonally adjusted initial claims number was 420,000, a decrease of 3,000 from the previous week's upwardly revised figure of 423,000.
• The advance number of actual initial claims unadjusted, totaled 495,587 in the week ending 12/18,

WEEK of 12/25/2010 (133,824 negative tally, from actual vs. pro-forma seasonally adjusted vs. real

• In the week ending 12/25, the seasonally adjusted initial claims number was 388,000, a decrease of 34,000 from the previous week's upwardly revised figure of 422,000…..The 4-week moving average was 414,000, a decrease of 12,500 from the previous week's revised average of 426,500.
• The advance number of actual initial claims unadjusted, totaled 521,824 in the week ending 12/25, an increase of 24,879 from the previous week. There were 556,517 initial claims in the comparable week in 2009.
• The number of people continuing to receive jobless benefits rose by 57,000 in the week ended 12/18 to 4.13 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.

WEEK of 01/01/2011 (168,279 negative tally, from actual vs. pro-forma seasonally adjusted vs. real

• In the week ending 01/01/2011, the seasonally adjusted initial claims number was 409,000, a increase of 18,000 from the previous week's upwardly revised figure of 391,000…..The 4-week moving average was 410,750, a decrease of 3,500 from the previous week's revised average of 414,250.
• The advance number of actual initial claims unadjusted, totaled 577,279 in the week ending 01/01/2011, an increase of 52,038 from the previous week. There were 645,446 initial claims in the comparable week in 2010.
• The number of people continuing to receive jobless benefits rose by 57,000 in the week ended 12/25 to 4.39 million, an increase of 273,882. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.