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Economix Blog: Handicapping May’s Job Numbers

June 6, 2013 by Leave a Comment

6:30 p.m. | Updated to include new data from a New York Times/CBS News poll.

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

The much-anticipated May jobs report comes out Friday morning at 8:30, and economists are expecting more of the same: a gain of about 165,000 jobs — the same number added in April — and a flat unemployment rate of 7.5 percent.

Many economists have warned that there may be risks to the downside, though, given a steady stream of disappointing economic data over the last few weeks. The construction spending numbers, the Institute for Supply Management’s nonmanufacturing index and the ADP employment report all came in below expectations. Talk of a “spring swoon” is resurfacing.

“In general, the economy is just puttering along,” said Joshua Shapiro, chief United States economist with MFR Inc. “Companies can get by without hiring people, so they do. I don’t see any reason to break out of the pattern this month.”

Consumers themselves have been pretty upbeat nonetheless, according to recent polling data.

In a New York Times/CBS News poll conducted May 31-June 4, 39 percent of respondents said that the condition of the economy these days was very or fairly good, the highest share saying this both since President Obama took office and even since the recession officially began in December 2007. About a third of respondents said that the economy is getting better, similar to what the trend had been in the previous six months. (Another 24 percent saying it’s getting worse and 42 percent say it is staying about the same.)

Nearly half of respondents – 46 percent — rated the job market in their area as very or fairly good these days, with a third saying that they think their local job markets will improve over the next year. (The poll has a margin of sampling error of plus or minus 3 percentage points.)

Some of this optimism likely has to do with rising home and stock market values, which makes consumers feel wealthier. Given the positive outlook among consumers, it’s not clear what’s dragging on the economy and the job market, particularly given how well the housing market seems to be doing.

One explanation has to do with weird weather.

Usually a lot of economic activity slows down during the winter — when frigid, snowy weather makes it difficult to build, for example — then picks up in the spring, when the weather is more accommodating. (The organizations and agencies that release economic data usually adjust the numbers with these predictable patterns in mind.) This year, though, the country had a mild winter and a cold spring, which means some of the economic activity usually tied to spring-temperature weather happened earlier than usual, and some of it may occur later than usual. In addition, there was a lot of rebuilding over the winter as a result of Hurricane Sandy, which put construction workers to work earlier than usual.

“There’s hiring that took place when it wouldn’t normally take place,” Mr. Shapiro said. “There are all these construction workers who were already hired, and maybe they’re moving on to something different now, but that’s not being counted as a new job.”

All of this could make recent job numbers look weaker than they might otherwise be.

The across-the-board federal spending cuts that officially began on March 1 — known as the sequester — may also be hurting the private sector, although it is hard to tell how much.

“Any negative news is going to be blamed on the sequester, which I think is becoming a bit of an excuse at this point,” said Joseph A. LaVorgna, chief United States economist at Deutsche Bank. “It’s a factor, but it’s not as big as people believe it is.”

All the same, when the jobs report comes out on Friday, economists will be looking at changes in the federal employment numbers, as well as sectors like manufacturing and professional services, to see if they are being obviously affected by the spending cuts. Much of the effect will be hard to detect, particularly if people directly harmed by the sequester are furloughed rather than laid off.

Another explanation for the weak string of economic data is that the numbers may be misleading — that they’re understating the “true” strength of the economy. That’s based on a pattern of revisions in recent months, particularly to the jobs report.

The first release of a month’s employment numbers, put out by the Bureau of Labor Statistics typically on the first Friday of the subsequent month, is an initial guess at what happened with hiring and firing, based on incomplete data. It gets the most attention, even though revisions to that initial estimate in the following two months, based on more complete data, can be significant.

For whatever reason, recent revisions have been very pro-cyclical: That is, when there were job losses, they turned out to be worse than initially estimated, and when there were job gains, they turned out to be much better than initially estimated. Whatever happened with employment, the initial release underestimated the change.

Here is a chart showing the difference between the third estimate (for example, the job change from February, as shown in a jobs report released in May) and the first estimate (the job change from February, as shown in a jobs report released in March):

Source: Bureau of Labor Statistics, via Haver Analytics Source: Bureau of Labor Statistics, via Haver Analytics

And here’s that same data series (the revisions) shown alongside what the change in payrolls was ultimately determined to be once all the data were in:

Source: Bureau of Labor Statistics, via Haver Analytics Source: Bureau of Labor Statistics, via Haver Analytics

Economists are hopeful that the job changes from the last couple of months will likewise be revised upward, and that even if Friday’s number disappoints, that it will understate the real job growth in the economy.

Article source: http://economix.blogs.nytimes.com/2013/06/06/handicapping-mays-job-numbers/?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Fed Weighs a Reaction to Stirrings of Recovery

April 4, 2013 by Leave a Comment

The economy added an average of 187,000 jobs a month from September to February, slightly faster than the average monthly pace from 2004 to 2006, the best years of the last economic upswing. The government plans to release a preliminary estimate Friday morning of March job creation.

Some Fed officials have suggested in recent weeks that if economic growth continues on its present trajectory, the central bank should begin to roll back its economic stimulus campaign by the middle of the year, ahead of expectations.

But the Fed’s chairman, Ben S. Bernanke, and his allies remain wary that another surprising spring will be followed by another disappointing summer. Janet L. Yellen, the Fed’s vice chairwoman, who is viewed as a potential successor to Mr. Bernanke, reflected that caution in a speech on Thursday.

“I am encouraged by recent signs that the economy is improving and healing from the trauma of the crisis, and I expect that, at some point, the F.O.M.C. will return to a more normal approach to monetary policy,” she said, referring to the Federal Open Market Committee, which sets policy for the central bank.

For now, she said, the Fed needs to remain focused on reducing unemployment.

Ms. Yellen also commented obliquely on her own future. Asked whether the economics profession, and central banks, needed more women in positions of power, she responded that such a need was “something we’re going to see increase over time, and it’s time for that to happen.”

The Fed announced last year that it intended to hold short-term interest rates near zero so long as the unemployment rate remained above 6.5 percent. It also said that it would buy $85 billion a month in Treasury and mortgage-backed securities to accelerate the decline. By expanding its asset holdings, the Fed continuously increases the scale of its effort to stimulate the economy.

Stronger data has raised hopes that the economy is once again growing fast enough to reduce the unemployment rate, which stood at 7.7 percent in February, little changed from 7.8 percent in September. But more than 20 million Americans are unable to find full-time jobs and it is not yet clear that the recent uptick in the economy is sustainable. The yield on the 10-year Treasury note fell to 1.77 percent on Thursday, indicating that some investors are pessimistic about the economy’s prospects.

In recent months, weekly claims for unemployment benefits have declined. But the Labor Department reported on Thursday that claims spiked in the latest week to the highest level in four months, although it cautioned that the estimate was unusually imprecise because the week included Easter.

“House prices are going up more than I would have expected six months ago,” Ms. Yellen said. “I think it’s making people feel a whole lot better.” She added: “I don’t have any doubt that our policies are contributing to the lowest interest rates, whether it’s borrowing for a car or borrowing for a mortgage. I believe that that is not only caused by our policy, but our policy is contributing.”

John C. Williams, the president of the Federal Reserve Bank of San Francisco, said on Wednesday in Los Angeles that he might support a reduction in the volume of the Fed’s asset purchases by summer and a suspension of the program before the end of the year.

“I’m hopeful that the economy has finally shifted into higher gear,” said Mr. Williams, who supported the purchases last year.

Esther L. George, president of the Federal Reserve Bank of Kansas City, reiterated on Thursday her view that the Fed should scale back immediately. Ms. George cast the sole dissenting vote at the last two meetings of the Fed’s policy-making committee. She told an audience in El Reno, Okla., on Thursday that she was more concerned than her colleagues that the Fed’s efforts to suppress borrowing costs could result in financial instability and faster inflation.

Ms. Yellen and other officials, however, seem inclined to postpone any decisions. The pace of economic growth has remained weak relative to the pace of job growth. The most recent round of federal spending cuts has only just begun to show results. And Fed officials have overestimated the strength of the recovery repeatedly in recent years, only to find the economy needed still more help. Caution may now dictate doing more rather than less.

Article source: http://www.nytimes.com/2013/04/05/business/economy/fed-weighs-a-reaction-to-stirrings-of-recovery.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Hewlett-Packard Joins Push to Limit Use of Student Labor in China

February 8, 2013 by Leave a Comment

Many factories in China have long relied on high school students, vocational school students and temporary workers to cope with periodic surges in orders as factory labor becomes increasingly scarce. Students complain of being ordered by school administrators to put in very long hours on short notice at jobs with no relevance to their studies; local governments sometimes order schools to provide labor, and the factories pay school administrators a bonus.

For much of the last decade, many of the world’s big electronics companies have largely neglected the problem, beyond in some cases tracking reports of the abuses. Apple made the unusual move last year of joining the Fair Labor Association, one of the largest workplace monitoring groups, which inspects factories in China that make computers, iPhones and other devices under contract from Apple. And last month, Apple said it would begin requiring suppliers to provide information about their student workers “so we can monitor this issue more carefully.”

Now H.P. is pushing even harder. Its rules, given to suppliers in China on Friday morning, say that all work must be voluntary, and that students and temporary workers must be free “to leave work at any time upon reasonable notice without negative repercussions, and they must have access to reliable and reprisal-free grievance mechanisms,” according to the company.

The rules also require that student work “must complement the primary area of study” — a restriction that could rule out huge numbers of students whose studies have nothing to do with electronics or manufacturing.

Enforcing workplace rules in China has always been difficult, as even Chinese laws on labor practices are flagrantly ignored by some manufacturers as they struggle to keep up with production demand amid labor shortages. The Chinese government announced last month that the nation’s labor force had begun to shrink slowly because of the increasingly rigorous one-child policy through the 1980s and 1990s.

But complying with the new rules might be easier for suppliers contracting with H.P., which has relatively steady demand through the year for its products, than for suppliers working for rivals like Apple, with its big bursts of sales when new models are introduced.

Howard Clabo, an H.P. spokesman, said that the company would hold training sessions for suppliers starting in March and also discussion sessions for government officials, nongovernment organizations and academics — an initiative that could put pressure on other companies.

Tony Prophet, H.P.’s senior vice president for worldwide supply chain operations, said in a phone interview that H.P. was also capping the combined number of students and temp workers at any supplier factory at no more than 20 percent of labor during peak periods, which tend to be during summer vacations and the lengthy Chinese New Year holiday. H.P. plans to reduce that to 10 percent, but has not decided when, Mr. Prophet said.

The practice of employing students and temporary workers has been at the center of growing criticism of employment practices at Chinese suppliers used by big international electronics companies. Some of the companies are now seeing that the problems can harm their reputations.

In announcing increased scrutiny of student workers last month, Apple said in its supplier responsibility report that the “cyclical nature” of the student work “makes it difficult to catch problems.”

“We’ve begun to partner with industry consultants to help our suppliers improve their policies, procedures and management of internship programs to go beyond what the law requires,” Apple said.

Mr. Prophet of H.P. presented his company’s new rules as a sign of corporate responsibility, as opposed to a competitive maneuver. “We’re doing this because we think this is an important issue, and there are certainly concerns around it and some ambiguity around the appropriate standards,” he said.

Labor activists have been particularly critical of Foxconn, a large Taiwanese contract manufacturer that produces electronic devices for Hewlett-Packard, Apple and other companies.

Keith Bradsher reported from Hong Kong and David Barboza from Shanghai. Xu Yan contributed research from Shanghai.

Article source: http://www.nytimes.com/2013/02/08/business/global/hewlett-packard-joins-push-to-limit-use-of-student-labor-in-china.html?partner=rss&emc=rss

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Half of Votes Counted, Ford Labor Contract Leans Into ‘Yes’ Territory

October 15, 2011 by Leave a Comment

As of late Friday morning, the contract was supported by 50.8 percent of voters so far, the union said on a Facebook page dedicated to its negotiations with Ford. It said 6,271 “yes” votes had been counted, compared with 6,085 “no” votes.

Until then, the “no” votes had been leading after workers at three large plants — one in Wayne, Mich., and two in Chicago — rejected the deal, largely over complaints that most workers would not receive wage increases. The swing into positive territory happened when 79 percent of workers at a plant in Flat Rock, Mich., voted in favor of the contract, according to the Web site of Local 3000 there; that is the largest margin of approval reported publicly so far.

The Flat Rock plant, which makes the Ford Mustang and a Mazda sedan as part of a joint venture, is in line to begin building the Ford Fusion midsize sedan if the contract passes, saving it from layoffs or possible closing after Mazda ends production there next year.

Voting is scheduled to finish Tuesday. The outcome largely hinges on how many of the more than 10,000 workers at U.A.W. locals in Dearborn, Mich., and Louisville, Ky., support the contract in the coming days.

If the deal fails, negotiators could return to the bargaining table under an indefinite extension of the old contract, the union could call a strike, or Ford could lock out the workers.

Union leaders across the country have begun assembling strike committees and distributing information about strike pay and procedures. At the same time, many have stepped up efforts to win support for the deal, warning workers that rejecting the agreement could result in a worse outcome.

“With the way the economy is and the way labor’s been under attack, I think to vote it down expecting to get more – I don’t think that’s realistic,” said Keith Brown, the president of Local 245 in Dearborn, Mich.

In 2009, Ford workers turned down concessions that the company sought to the four-year contract it signed in 2007. Mr. Brown said he hoped that workers would realize that turning down an entirely new contract could have more negative consequences than voting against modifications to an existing contract.

Ford is the only American auto company that the U.A.W. can strike against during this round of contract talks, but both the company and the union have said they wanted to maintain a civil relationship.

If the Ford contract passes, workers would get bonuses of $6,000, or $5,000 if they were hired less than a year ago. They also would receive a $3,752 advance on next year’s profit-sharing checks in November and $1,500 annually from 2012 through 2015.

The total of the bonuses is at least 50 percent more than G.M. and Chrysler agreed to pay their workers. G.M. workers have already ratified their new contract, and voting at Chrysler, which reached a tentative deal Wednesday, is to begin soon.

Article source: http://feeds.nytimes.com/click.phdo?i=c96adc46a68df5784edaf7ff3b2bcee5

Filed Under: Business News Tagged With: , ,

Economix: In the Jobs Report, One Big Question

June 3, 2011 by Leave a Comment

In each of the last two months, I’ve posed five big questions about the jobs report on the eve of its release. This month, there is only one big question: Has job growth slowed, as many economists now fear?

I won’t be doing as much blogging Friday as I usually do on the day of a jobs-report release. So I’ll offer my usual advice in advance: don’t pay too much attention to the unemployment rate, whatever it does. It’s based on a much smaller sample (from a survey of households) than the monthly estimate of changes in employment (which comes from a survey of businesses). The unemployment rate can also be affected by how many people have stopped looking for work and not counted as officially unemployed.

Instead, keep your eyes on three numbers: 1) the employment change in May; 2) the employment change in April (the most recent estimate, set to be revised, was a gain of 244,000 jobs); 3) the employment change in March (last estimated to be a gain of 221,000 jobs)?

Not long ago, policy makers and Wall Street forecasters were predicting that job growth would be accelerating through most of this year. So far, that has been the case. Will it still appear to be the case on Friday morning?

Article source: http://feeds.nytimes.com/click.phdo?i=e524b0067c310aca74035efb71a32923

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Economix: Looking Ahead to the Jobs Report

April 1, 2011 by Leave a Comment

Maybe, just maybe, this is the month the job number pops.

The March job report will be released Friday morning, and quite a few economists, to the extent that they can be drawn into such discussions, are betting on a number just short of 200,000.

It’s not hard to understand that bet. The weekly unemployment claims have declined steadily, from the mid-400,000s to the neighborhood of 385,000. In almost any other context, the latter would be a grim number indeed. But in this slowest and most sluggish of recoveries, it is a sign of somewhat fewer layoffs.

And the unemployment numbers for February offered signs of hope as well. The economy added 192,000 jobs, and the 12th consecutive month of gains by companies. A comparable gain in March would provide the strongest two-month performance since last spring, when short-term Census hiring was driving the trend and private sector hiring was still weak.

“I suspect tomorrow will be the first time I use ‘traction’ and ‘momentum,’ ” said Heidi Shierholz, an economist at the liberal Economic Policy Institute. “I suspect that the workers on the sideline will start coming back in.”

This could lead to a paradoxical moment, however, as the unemployment rate might rise even as jobs are added. It now stands at 8.9 percent. The explanation goes to the size of the work force, which has steadily diminished for several years. Just 64.2 percent of adults are either in the work force, or looking for a job; that’s the lowest labor participation rate in a quarter-century.

Many Americans, in other words, have given up hope of finding work in this most terrible of economies, and survive on a spouse’s salary or savings. And they wait and hope for an upturn. “The unemployment rate may go up, but the bad news will be the good news,” Ms. Shierholz noted. “It will mean people feel better about getting back into the economy.”

The larger question is what the medium-term future augurs. Will the job force continue to expand through the spring, and perhaps start to add jobs with enough vigor — 300,000, say — to reduce the unemployment rate substantially? As Ms. Shierholz notes, if the economy adds 200,000 jobs a month, it will be 2019 before it reaches the same employment rate as before the Great Recession started. (Since the recession began in December 2007, the economy has shed 7.5 million jobs.)

Many economists speak optimistically of the spring, but the outlook grows uncertain after that. The international storm clouds are many, from spectacular debt problems in Europe to revolution sweeping the oil-rich Middle East to Japan and its many maladies. And then there is the possibility of a government shutdown in Washington, as the Republican House challenges the White House.

Some of the problems arising from these storms, such as higher oil prices, could take a while to work through the economy and, possibly to erode consumer confidence.

“The first half of this year will be the best job market that we’ll see in this whole expansion,” said David Levy of the Jerome Levy Forecasting Center. “We’re riding the crest of earnings. “But after that, and looking toward 2012, the situation is very questionable.”

Article source: http://feeds.nytimes.com/click.phdo?i=f39b33a77c47720a8b85288b022c37fe

Filed Under: Economy News Tagged With: , ,