November 2009 job losses: BLS vs. ADP

Via Mark Thoma, FT Alphaville questions the accuracy of the BLS payroll numbers released on Friday:

Just how amazing were the US payroll numbers released on Friday?

So amazing they’re verging on the (perish the thought) unbelievable, according to some analysts.

The consensus forecast among analysts for the November job loss had been -130,000, with even the relatively optimistic and sometime-clairvoyant economists at Goldman Sachs forecasting -100,000. The official data showed a fall of just 11,000 — about 90 per cent fewer than the consensus estimate.

Many months ago I began tracking the Automatic Data Processing payroll numbers in addition to those from the Bureau of Labor Statistics in order to satisfy those conspiracy theorist commenters who just don't trust the government's data. For November 2009, ADP and the BLS disagree by over 150,000 job losses.

Here's my graph of BLS data for this recession:


Here's my graph of ADP data for this recession:


Update: I just noticed that the BLS measures both private and government payrolls while ADP only measures private payrolls. However, even just comparing private payrolls, the disparity is roughly the same. ADP says there were 169,000 private nonfarm job losses in November, while the BLS says there were only 18,000 private nonfarm job losses—a 9-fold difference.

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Thoughts on "too big to fail"

Economist and blogger Rebecca Wilder has some thoughts on "too big to fail" banks.

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More bubbles to come

Robin Wells, a former Princeton University economics professor and current wife of Paul Krugman, says we will continue having financial bubbles:

The world is trapped in a global savings glut. It is both the source of our economic woes and an obstacle to the task of pulling ourselves out of the ditch. Worse yet, the glut's continued existence will feed a succession of asset bubbles until we confront it, head on, and find ways to soak up the excess.

Yes, we can blame the City and Wall Street for turning the global savings glut into fissile material. But that's like saying, "hyenas do what hyenas do". Given extraordinarily lax regulation and a flood of money to play with, bankers were just acting according to their incentive schemes. They merely took advantage of the opportunities the glut presented. The real culprits are thrifty Germans, and state-owned enterprises in China – along with governments of other countries, of course, turning a blind eye to the escalating problems. ...

What makes this a global glut is that the world as a whole is saving more than can be profitably invested. The corollary is that, eventually, those funds will earn less than nothing. And through financial engineering, those losses are now distributed around the world. ...

Until the savings glut is vanquished, asset bubbles and instability will be fed, exacerbating income inequality and favouring wealthy bankers and the Chinese elite. It will continue drawing resources away from productive sectors of the economy and channelling them into high-paying but socially useless financial engineering – or into yet more excess capacity.

If you've ever considered going into banking, perhaps it's not too late. Real estate agents may again be raking in the dough. And Bubble Meter may continue to have plenty to blog about.

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Bargain book about the financial crisis

Looking for an inexpensive Christmas gift for yourself or others? Just want something to read while traveling? The Two Trillion Dollar Meltdown is currently available from Amazon.com for only $4.55.

I haven't read the book, so I can't attest to its quality. I do, however, get a kick out of this 1-star reader review of the first edition from April 29, 2008:

"Trillion Dollar Melt Down" is about the 2007 sub-prime credit crisis. The huge problem, though, is that the book mostly proclaimed that the sky was falling in 2007 when it was written, but now - (mid 2008) when the book has finally reached the market - the sky still hasn't fallen, no recession has started, and unemployment is still very low. The book, then, seems like a short (194 pages), obsolete gimmick, raced to market, to capitalize on old fears about something that never happened.

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The unemployment rate declines!

The economy keeps getting better (or less bad). The unemployment rate actually fell in November, down to 10.0% compared to 10.2% a month earlier:


The year-over-year percent change in initial jobless claims has fallen below zero, which means employed workers are safer than they were a year ago:


November's month-over-month change in nonfarm payrolls was just about zero, the best it's been since December 2007:

Compare the above graph with a graph of ADP's numbers.

The year-over-year percent change in aggregate weekly hours worked is rising:


Permabears must be growling at the improving data.

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2010 housing predictions

CNBC real estate reporter Diana Olick makes four predictions for the coming year:

1. The residential housing market will dip again in mid-2010 before settling into a recovery in the back half of the year.
2. Foreclosure inventory will be a lot higher than some predict.
3. No more historic lows on the 30-year fixed.
4. Commercial real estate will continue to suffer the ills of low vacancy rates, low rents and high default rates.

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ADP: November 2009 job losses

According to the ADP Employment Report, the month over month rate of job losses continued to decline in November. This graph shows the number of job losses in thousands:


Here are ADP's comments on the numbers:

Nonfarm private employment decreased 169,000 from October to November 2009 on a seasonally adjusted basis, according to the ADP National Employment Report®. ...

November was the eighth consecutive month during which the decline in employment was less than in the previous month. Although overall economic activity is stabilizing, employment usually trails economic activity, so it is likely to decline for at least a few more months.

Keep in mind that we need 100,000-200,000 job gains each month just to keep up with population growth.

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Home sales contracts up in October

The number of home sales contracts surged in October, as home buyers tried to take advantage of the first time homeowner tax credit:

In October the National Association of Realtors recorded an unprecedented ninth consecutive month of increases in the number of signed contracts.

Although these are not closed sales, and some deals can fall through, signed contracts are a good indicator of where the housing market is headed.

Between September and October NAR's Pending Home Sales Index rose 3.7% to 114.1 from 110 in October. But the index is 31.8% higher than a year ago, when it was 86.6. That's the biggest year-over-year gain in the history of the index.

The PHSI is also at its highest level since March 2006, and the rise confounded expert expectations. A panel of industry analysts put together by Briefing.com had forecast a 1% drop in new contracts.

NAR's chief economist, Lawrence Yun, gives much of the credit for increased sales to the homebuyer's tax credit, which first-time homebuyers could claim to reduce their taxes by up to $8,000. ...

The credit had been due to lapse on Dec. 1, so many October buyers may have acted to get in under the wire.

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Law professor: Walk away

A law professor encourages people to walk away from their homes:

Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don't feel guilty about it. Don't think you're doing something morally wrong.

That's the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."

White argues that far more of the estimated 15 million American homeowners who are underwater on their mortgages should stiff their lenders and take a hike. ...

Better yet, you can default "strategically." Buy all the major items you'll need for the next couple of years — a new car, even a new house — just before you pull the plug on your current mortgage lender.

Scenario #1: You walk into a bank and take a bunch of money that doesn't belong to you. This is called theft.

Scenario #2: You take out a loan, promising to pay it back. Then, after you have the money, you decide not to pay it back. How is this not also theft?

I can completely understand not paying back a loan if you lose your job and are unable to pay back the loan. I can also understand if you get sick and end up with huge medical bills that make it impossible to pay back a loan. I can even understand not paying back a loan if the bank deceived you regarding what your payments would be.

However, if you decide not to pay back the loan simply because you overpaid for your house, then I consider that the moral equivalent of theft.

Keep in mind that being underwater doesn't mean you can't afford the monthly payments. It just means that the value of your house has fallen by more than the amount of your down payment (and any subsequent principal payments). A person who stiffs their lender because their investment didn't turn out as expected is scum. Just because you can steal from a bank doesn't mean you should steal from a bank.

Update: This is not just a moral issue. It's a practical one, too. Mortgage interest rates contain a risk premium. A society in which homeowners eagerly stiff the bank is a society in which it is riskier to lend. A society in which homeowners feel a moral obligation to repay their debts is a society in which it is less risky to lend. More risk means a higher risk premium, and thus higher interest rates. Less risk means a lower risk premium, and thus lower mortgage interest rates. Society as a whole benefits when everyone feels a moral obligation to fulfill their end of agreements.

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WTF?

"You buy this house and you will be rich."

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