Is Santa Claus Bringing 1 Million Jobs for the Holidays?

Written by Steven Hansen

Next week, the BLS will issue the Jobs Report – the last one before the usual holiday hiring season begins.  Jobs growth is seasonal – and most are so attuned to the seasonally adjusted data that they do not grasp employment dynamics.  Looking at the unadjusted data, the real jobs growth is in February, March and April.  After April, there are ups and downs of jobs growth, culminating with a pick up before Christmas.  But come January, all  that jobs growth is eliminated, and the real jobs level returns to the employment gains between the March and April levels.

In other words, historically the end-of-year holiday hiring is simply employment statistical porn as all the jobs gained are lost in late December / January, as the following graph demonstrates.

Of course recessions play havoc with historical relationships – but, if this year is normal, the unadjusted non-farm jobs growth for 2012 will be between 1.8 (January to March Jobs growth) and 2.6 million (January to April Jobs growth).  Last year (2011) the growth was nearly 1.8 million with January to March Jobs growth at 1.7 million and the January to April Jobs growth at 2.9 million.

This past week Challenger, Gray & Christmas, Inc. predicted better jobs growth over the 2012 holiday season.

“The economy has continued its slow recovery and surveys of retailers show that they are hopeful for solid sales gains this year.  However, recent consumer confidence readings have been relatively week and unemployment remains stubbornly high.  The mixed picture is likely to compel retail employers to proceed cautiously when it comes to hiring extra workers for the holiday season.  Look for many to start at last year’s levels and hire additional workers only if strong sales early in the season warrant it,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

“Last year, retailers added just over 660,000.  This year, that figure could approach 700,000.  There is still too much uncertainty to expect seasonal employment gains to reach the level we saw in 2006, when retailers added nearly 747,000 extra workers at the end of the year.  We may never again reach the level of hiring achieved in 1999, at the height of the boom, when nearly 850,000 seasonal workers were added,” he added.

Challenger included the seasonally adjusted holiday season jobs growth numbers, and for grins I have provided the unadjusted numbers.

Total Non-Farm Jobs Growth for Three Months (October, November, December)

Total Seasonally Adjusted Jobs Growth Total Unadjusted Jobs Growth
2000 788,100 860,000
2001 585,300 -381,000
2002 669,600 376,000
2003 640,000 773,000
2004 710,200 1,008,000
2005 711,400 1,082,000
2006 746,800 970,000
2007 720,800 829,000
2008 324,900 -1,432,000
2009 495,800 101,000
2010 647,600 994,000
2011 660,200 990,000
AVERAGE 657,700 514,000

source: Challenger, BLS

My takeaway is that the BLS seasonal adjustments is causing a distortion in understanding employment dynamics.  The unadjusted numbers are showing jobs growth in 2010 and 2011 are indeed as good as 2006 – and 2010 and 2011’s growth is high historically.

Of course every job gained is important – even if it is temporary.  It is likely Santa Claus will bring 1 million jobs this coming holiday season, and for that we should be thankful.

Other Economic News this Week:

The Econintersect economic forecast for September 2012 shows moderate growth continuing. Overall, trend lines seem to be stable even with the fireworks in Europe, and poor data from China. There is a whiff of recession in the hard data – excluding certain surveys are at recession levels – with container imports contracting for two months in a row.

ECRI is still insisting a recession is here (a 07Sep2012 post on their website). ECRI first stated in September 2011 a recession was coming . The size and depth is unknown. The ECRI WLI growth index value improved this week enjoying its fifth week in positive territory. The index is indicating the economy six month from today will be slightly better than it is today.

Current ECRI WLI Growth Index

/images/z weekly_indexes.PNG

Initial unemployment claims declined moderately – from 382,000 (reported last week) to 359,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate (background here and here). The real gauge – the 4 week moving average – fell slightly from 377,750 (reported last week) to 374,000. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

Weekly Initial Unemployment Claims – 4 Week Average – Seasonally Adjusted – 2010 (blue line), 2011 (red line), 2012 (green line)

/images/z unemployment.PNG

Data released this week which contained economically intuitive components (forward looking) were

  • Rail movements (where the economic intuitive components continue to be indicating a moderately slightly expanding economy)..

All other data released this week does not have enough historical correlation (foresight) to the economy to be considered intuitive, or is simply a coincident indicator to the economy.

Weekly Economic Release Scorecard:

August 2012 Real Personal Income Contracting -€“ Recession Marker?
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Japan and South Korea Industrial Production Numbers Fall
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LPS Reports Home Prices Increased 0.2% In July 2012
IMF Offers Solutions to High Government Debt
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Kansas City Fed: Manufacturing Activity Slows but Grows in September 2012
August 2012 Pending Home Sales A Little Soft
Chicago Fed Midwest Manufacturing Index (CFMMI) Decreased 1.2% in August 2012
Third Estimate 2Q2012 GDP Revised Down to 1.3%
22September2012 Unemployment Claims: Moderates this Week
Durable Goods New Orders Very Large Contraction in August 2012
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The Market: Down, Up, Down
China: Largest Steelmaker Cutting Back Production
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Philly Fed USA Coincident Index Grows More Slowly in August 2012
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Vehicle Traffic Volumes Fall 0.3% in July 2012
August 2012 New Home Sales A Little Soft
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August Payrolls Data Actually Strong
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Total SA: Oil Drilling in the Arctic is Too Dangerous
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Richmond Fed Manufacturing Activity Improves in September 2012, Now Positive
September 2012 Conference Board Consumer Confidence Large Increase
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Average Gasoline Price Falls $0.05 Week Ending 24 September 2012
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Buddy, Can You Spare a Dime?
India Opening Markets to Outsiders
Gold and Silver Just Resting
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Texas Manufacturing Expands at Faster Pace in September 2012
LPS “First Look” for August 2012 Shows Continuing Decline in Home Loan Delinquencies
CFNAI Super Index Shows Economy Hit the Brakes in August 2012
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China: Rebalancing Means Exports Will Be Less Competitive
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The Great Debate©: Is There a Role for Manufacturing Led Growth?
Trefis: Highlights Week Ending 21 September 2012
Gasoline Use Down, Recession Possibility Up
Why QE3 Will Not Help Homebuilders
QE3: No Economic Boost and No Inflation

Bankruptcies this Week: