I posted last night about the recent large revisions to the headline US jobs loss number. Today the BLS released its annual benchmark revision (which are separate from the monthly revisions that take place for the two months following the initial estimate). No surprise, the difference between the preliminary and final revision is huge. And very negative.
“The level of payrolls now reported for December is a stunning 1363K below what had been reported last month,” wrote Joshua Shapiro, Chief US Economist at MFR. “The main reason that payrolls were overstated by so much was in all likelihood the ‘birth/death adjustment,’ which is the methodology used to capture the effect of new small business formation. In the current economic and financial environment, this statistical adjustment is overstating the vibrancy of new business formation, particularly with small businesses finding bank credit very difficult to come by.”
One point to the central bankers. Inflation-worriers are criticising central banks’ unwillingness to combat price rises by raising interest rates. But a lot of data – on mortgage defaults, for example – is showing the problems for British people even at record low interest rates. One such statistic is insolvency data.
The latest quarterly figures show corporate insolvencies high but falling, and individual insolvencies still on the rise (NB. these are absolute figures that do not reflect growth in the number of companies/individuals).
Individual insolvencies are worrying since interest rates are at record lows. There is also evidence that mortgage payments are being paid by credit cards.
Much talk today of ‘risk contagion‘ as share prices continue to fall sharply across the world. Equities have been falling since the start of the year, but declines over the past two days have been sharp, between 3 and 5 per cent. Analysts are blaming growing fears over sovereign debt in Greece and Portugal – as measured by still-widening credit default swap spreads – and falling confidence in sovereign debt generally.
US markets were not helped by an unexpected rise in first-time unemployment claims yesterday, and today’s US non-farm payroll data is nervously awaited.
Governor Patrick Honohan has dealt swiftly with the row over central bank staff taking their spouses along on trips, at the bank’s expense. The story broke yesterday, and by the evening Mr Honohan had announced an end to the policy. The total additional payment was €67,450, at an average (European) trip cost of €435 per spouse, with the 9 longer-distance trips accordingly more expensive.
The Swiss central bank has declined to comment following reports that it sold swiss francs for euros in a rare foray into Asian forex markets. The euro had been under downward pressure because of sovereign debt fears in several member states, hitting a 15-month low directly before the intervention. The Swiss National Bank has a stated policy of intervention to weaken the swiss franc while the threat of deflation persists.
At 8:30am EST tomorrow when non-farm payroll comes out, let’s all take a minute to just breathe.
Sure, the markets – already clearly jittery – will be opening an hour after jobs data release. And economists aren’t even sure if we’re going to gain or lose jobs this month – the consensus estimate, according to Bloomberg, is no net change in jobs. An upside surprise will look better than it is by virtue of being positive (at long last), a downside surprise will look worse by being, yet again, negative.
But how accurate will the initial estimate of unemployment really be? If the last few months are any indication, not very. Take a look at this chart I posted last month after December’s unexpected loss of 85,000 jobs.