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Thread: ADP Estimates U.S. Firms Added Fewer Workers in May

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    ADP Estimates U.S. Firms Added Fewer Workers in May

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    By Timothy R. Homan - Jun 1, 2011 8:40 AM ET
    Companies in the U.S. added fewer workers than forecast in May, a sign that job growth is struggling to gain momentum, data from a private report based on payrolls showed today.
    Employment increased by 38,000 last month, the smallest increase since September, from a revised 177,000 in April, according to figures from ADP Employer Services. The median estimate in the Bloomberg News survey called for a 175,000 advance for May.
    Such gains in employment are insufficient to help the world’s largest economy accelerate after a surge in food and fuel costs earlier this year. Businesses added 207,000 jobs last month after a 268,000 gain in April and the jobless rate dipped to 8.9 percent from 9 percent, economists project a Labor Department report to show in two days.
    “It is a warning shot across the bow that job growth is also weakening along with the other high frequency numbers,” Eric Green, chief market economist at TD Securities Inc. in New York, said in an e-mailed note to clients. “The weakness reflects a general slowdown and turn in sentiment that set in with the sharp rise in energy prices, disruptions from Japan, and to a lesser extent risk aversion stemming from the Greek fiasco.”
    Things are not looking good for employment, and housing. Something interesting....

    Dallas-Fort Worth again leads nation in job growth | Business | Dallas Business, Texas B...

    http://www.cnbc.com/id/43234521
    Last edited by American; 06-01-11 at 10:58 AM.
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    Quote Originally Posted by American View Post
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    Things are not looking good for employment, and housing. Something interesting....

    Dallas-Fort Worth again leads nation in job growth | Business | Dallas Business, Texas B...

    http://www.cnbc.com/id/43234521
    That's what we call economic recovery these days...

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    Re: ADP Estimates U.S. Firms Added Fewer Workers in May

    I love how all these economist are always pondering the word "unexpected" in order to make their inability to calculate and predict statistics to a near point of precision look alright.
    "It is a sad day in society when people adjust the facts to fit their beliefs, rather than adjust their beliefs to fit the facts."
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    Re: ADP Estimates U.S. Firms Added Fewer Workers in May

    Several quick thoughts:

    1. The housing sector is still working through the debris of the bubble that had inflated prices well beyond any rational bound. Even as the sector may experience a continuing decline and then stabilization of prices over the next 6-12 months, that is not entirely a bad development. Once home prices are more compatible with underlying fundamentals and if careful attention is paid to leverage going forward, that will be a positive development for the longer-term. A 20% downpayment requirement for FHA loans is something that is on the table and, IMO, would help mitigate the risk of a future debt-driven home-buying spree anytime soon.

    2. The economy is going through a soft patch. Aside from the shock that resulted from Japan's earthquake and tsunami, the economy is in the midst of the always tricky hand-off from fiscal/monetary stimulus to the private sector. QE2 likely won't be renewed. Most of the impact of the fiscal stimulus is fading into the past. Energy prices have been somewhat elevated and that trend will likely persist through the summer, though the deceleration in the U.S. economy could tend to cap the rise in the price of crude oil barring any geopolitical shocks that disrupt supply.

    3. Enormous debt overhang (public sector and American households) will likely continue to sap some of the long-run growth potential for the U.S.

    4. The recent economic decelaration may be cited by some political leaders as a new excuse to avoid fiscal consolidation (either by foregoing spending reductions and/or seeking additional tax cuts). IMO, such a posture is risky as it could begin to create perceptions that the U.S. remains unwilling or unable to make the decisions necessary to address its growing long-term imbalance. Accordingly, the nation's growth outlook could be dimmed from this continuing delay of fiscal consolidation. In turn, that could lead to expectations of slower tax revenue growth and larger long-term imbalances, a peception that could expedite a credit downgrade for the U.S.

    5. I don't believe the continuing challenges in reaching agreement on a debt ceiling increase are currently impacting U.S. macroeconomic performance. Market pricing suggests a continued consensus that a deal will be reached. Indeed, the 10-year yield fell below 3.0% today. Were risk premia associated with a possible default on the increase, yields would be stickier on the upside. That is not yet happening. Whether the markets are assuming greater rationality among the decision makers than might actually exist is a risk of sorts, but that is far from the most likely scenario.

    6. Once the hand-off from monetary and fiscal stimulus is completed and assuming the economy continues to grow (I believe it will with annual real GDP growth coming to 2.5% this year), the current hiring pause of sorts will likely ease. The wildcard is a reckless self-inflicted crisis from a failure to raise the debt ceiling on a timely basis. A business-as-usual fiscal path would also sap some of the potential for renewed hiring from a continuation of the economic recovery given the greater uncertainty about the nation's fiscal future that would result from such a path.
    Last edited by donsutherland1; 06-01-11 at 05:00 PM.

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    Re: ADP Estimates U.S. Firms Added Fewer Workers in May

    by more than a dozen mainstream accounts, we are still looking at about a 3 year "inventory" of foreclosures still to be worked thru

    Foreclosure sales slow, but remain very high - Business - Eye on the Economy - msnbc.com

    according to msnbc saturday morning, this quantifiable inventory is exacerbated by a "shadow inventory" of homes currently protected by more sympathetic judges in certain judicial districts

    bottom line---we are nowhere near the bottom of the housing crisis, we still have several years to go

    indeed, yesterday msnbc, looking at the housing data which is extremely empirical, readable, predictable, noted, "prices have now fallen further since the bubble burst than they did during the great depression"

    "it took 19 years for the housing market to regain its losses after the depression ended," chris matthews' home network continued

    Home prices drop into double-dip territory - Business - Eye on the Economy - msnbc.com

    fyi

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    Re: ADP Estimates U.S. Firms Added Fewer Workers in May

    Quote Originally Posted by donsutherland1 View Post
    Several quick thoughts:

    1. The housing sector is still working through the debris of the bubble that had inflated prices well beyond any rational bound. Even as the sector may experience a continuing decline and then stabilization of prices over the next 6-12 months, that is not entirely a bad development. Once home prices are more compatible with underlying fundamentals and if careful attention is paid to leverage going forward, that will be a positive development for the longer-term. A 20% downpayment requirement for FHA loans is something that is on the table and, IMO, would help mitigate the risk of a future debt-driven home-buying spree anytime soon.

    2. The economy is going through a soft patch. Aside from the shock that resulted from Japan's earthquake and tsunami, the economy is in the midst of the always tricky hand-off from fiscal/monetary stimulus to the private sector. QE2 likely won't be renewed. Most of the impact of the fiscal stimulus is fading into the past. Energy prices have been somewhat elevated and that trend will likely persist through the summer, though the deceleration in the U.S. economy could tend to cap the rise in the price of crude oil barring any geopolitical shocks that disrupt supply.

    3. Enormous debt overhang (public sector and American households) will likely continue to sap some of the long-run growth potential for the U.S.

    4. The recent economic decelaration may be cited by some political leaders as a new excuse to avoid fiscal consolidation (either by foregoing spending reductions and/or seeking additional tax cuts). IMO, such a posture is risky as it could begin to create perceptions that the U.S. remains unwilling or unable to make the decisions necessary to address its growing long-term imbalance. Accordingly, the nation's growth outlook could be dimmed from this continuing delay of fiscal consolidation. In turn, that could lead to expectations of slower tax revenue growth and larger long-term imbalances, a peception that could expedite a credit downgrade for the U.S.

    5. I don't believe the continuing challenges in reaching agreement on a debt ceiling increase are currently impacting U.S. macroeconomic performance. Market pricing suggests a continued consensus that a deal will be reached. Indeed, the 10-year yield fell below 3.0% today. Were risk premia associated with a possible default on the increase, yields would be stickier on the upside. That is not yet happening. Whether the markets are assuming greater rationality among the decision makers than might actually exist is a risk of sorts, but that is far from the most likely scenario.

    6. Once the hand-off from monetary and fiscal stimulus is completed and assuming the economy continues to grow (I believe it will with annual real GDP growth coming to 2.5% this year), the current hiring pause of sorts will likely ease. The wildcard is a reckless self-inflicted crisis from a failure to raise the debt ceiling on a timely basis. A business-as-usual fiscal path would also sap some of the potential for renewed hiring from a continuation of the economic recovery given the greater uncertainty about the nation's fiscal future that would result from such a path.
    1. You do not seem to be taking into account the large overhang of houses yet to be brought to market because of the foreclosure mess. You also do not seem to take into account the fact that the percentage of people who are able/willing to own homes will continue to decrease thus making the gap between homes already built and future demand larger still. People have been talking about this 6-12 month turnaround for the last year.

    2. The economy is also looking at what our economy will look like as we enter into an age of "austerity". By that I mean that deficit spending and quantitative easing have continued to keep the economy at an unsustainable level. Not sure we can have real long term growth until we allow the economy to find it's real bottom.

    3. True. But this only gets worse as the administration will not allow us to get closer to balance. As this would mean a weak economy and hurt the president's re-election chances.

    4. Agree

    5. Not sure. There are competing problems with fiat currencies in the world. The Euro has huge problems with Greece, Portugal etc. Japan has a big problem with their debt. People can't buy China's currency. Finally you have the Fed in the market daily buying much of the new debt issued by the government.

    6. Your 2.5% is consistent with what the PIMCO people talk about as the "new normal". The 2.5% may be correct, but we need to remember that the U.S. has largely exported it's manufacturing base. Thus the growth in jobs will largely come from the medical industry and service ( low paying) jobs. We have seen almost nothing in the last 20 years to support a return of higher paying manufacturing jobs in the U.S. That includes the stimulus which as PIMCO has called it a sugar high for the economy. Almost nothing which will help the economy long term.

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    Re: ADP Estimates U.S. Firms Added Fewer Workers in May

    Quote Originally Posted by washunut View Post
    1. You do not seem to be taking into account the large overhang of houses yet to be brought to market because of the foreclosure mess. You also do not seem to take into account the fact that the percentage of people who are able/willing to own homes will continue to decrease thus making the gap between homes already built and future demand larger still. People have been talking about this 6-12 month turnaround for the last year.
    I do. The 6-12 month figure is for a bottom. Afterward, I expect home price increases to lag gains in national income for an extended period of time. That was the case for most of the 20th century, excepting the run-up prior to the Great Depression and the decoupling from fundamentals beginning in the late 1990s. Homes will return to serving as good places to live far more than speculative investments. From a macroeconomic standpoint, that is not a bad thing given all the leverage involved. Home prices circa 2006 had no basis in economic reality. If this housing bust is similar to some of the big ones that have occurred internationally, it might be another decade +/- a few years before home prices approach their frothy 2006 valuations. Fiscal consolidation/austerity could further delay that timeframe, as incomes would grow more slowly than would otherwise be the case and the unemployment rate would be higher than would otherwise be the case.

    2. The economy is also looking at what our economy will look like as we enter into an age of "austerity". By that I mean that deficit spending and quantitative easing have continued to keep the economy at an unsustainable level. Not sure we can have real long term growth until we allow the economy to find it's real bottom.
    I don't disagree. I've been considering starting a thread devoted to the topic of a looming age of austerity/simultaneous fiscal consolidation in many parts of the EU and the U.S. There is little doubt that there will be stiff headwinds against economic growth in such an atmosphere.

    3. True. But this only gets worse as the administration will not allow us to get closer to balance. As this would mean a weak economy and hurt the president's re-election chances.
    I agree that the President's re-election prospects would be hurt by a weak economy. Right now, I still believe his re-election is more likely than not, but things could still change should an economic downturn commence.

    5. Not sure. There are competing problems with fiat currencies in the world. The Euro has huge problems with Greece, Portugal etc. Japan has a big problem with their debt. People can't buy China's currency. Finally you have the Fed in the market daily buying much of the new debt issued by the government.
    Aside from the widely-publicized hazards in parts of the Euro zone, Japan is a looming problem. That Japan's population has far larger savings than the American population (per capita) is not reduce the gravity of Japan's escalating debt. That Japan is in the midst of population decline amplifies the looming problem. IMO, Japan's current Triple A rating is mostly a function of legacy, not structural underpinnings. I don't see Japan embarking on serious fiscal consolidation for perhaps at least several years and believe that its credit rating will ultimately be lowered.

    6. Your 2.5% is consistent with what the PIMCO people talk about as the "new normal". The 2.5% may be correct, but we need to remember that the U.S. has largely exported it's manufacturing base. Thus the growth in jobs will largely come from the medical industry and service ( low paying) jobs. We have seen almost nothing in the last 20 years to support a return of higher paying manufacturing jobs in the U.S. That includes the stimulus which as PIMCO has called it a sugar high for the economy. Almost nothing which will help the economy long term.
    My 2.5% figure is for 2011. I do believe that the growing public debt and enormous household debt will damp growth below levels experienced during the 1990s. As such, I strongly disagree with OMB's projections of 4% real annual growth through the medium-term. Those figures are too optimistic. As for the stimulus, I believe both the monetary and fiscal stimulus provided some boost to the real economy (short-lived), and may well have contributed to what appeared to be the start of a decoupling of stock prices from economic growth.

    Early last month, I noted that since the economy bottomed out in 2009 Q2, nominal GDP has expanded at an annual rate of 3.9%. In contrast, the S&P 500 has increased at an annual rate of 23.3%. Both figures are through 2011 Q1. Since the end of 2009 Q2, nominal GDP has risen by 6.9%, while the S&P 500 has rocketed by 44.2%. In indexed terms, the S&P 500 is now 135% of the value of indexed nominal GDP.

    Over the past year, the rate of divergence between the S&P 500 and nominal GDP growth has accelerated. The deceleration in economic growth and the end to stimulus may now have initiated a correction. Time will tell on that front.

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    Re: ADP Estimates U.S. Firms Added Fewer Workers in May

    oh, yes, correction...

    a magnificent post above

    concerning obama's reelection prospects---he must hold on to indiana, north carolina, virginia, ohio and florida

    if he does he wins by 4

    if republicans take the five kingmaker states above, they will need 4 more ev's

    within red grasp---new hampshire with 4 ev's, maine with 4, pennsylvania 21, michigan 17, wisconsin 10, minnesota 10, iowa 7, colorado 9, new mexico 5 and nevada also with 5

    fyi

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    Re: ADP Estimates U.S. Firms Added Fewer Workers in May

    I love my state...
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    Re: ADP Estimates U.S. Firms Added Fewer Workers in May

    it's been a miserable month

    cnbc today:

    The last month has been a horror show for the U.S. economy, with economic data falling off a cliff, according to Mike Riddell, a fund manager at M&G Investments in London.

    "It seems that almost every bit of data about the health of the US economy has disappointed expectations recently," said Riddell, in a note sent to CNBC on Wednesday.

    "US house prices have fallen by more than 5 percent year on year, pending home sales have collapsed and existing home sales disappointed, the trend of improving jobless claims has arrested, first quarter GDP wasn’t revised upwards by the 0.4 percent forecast, durables goods orders shrank, manufacturing surveys from Philadelphia Fed, Richmond Fed and Chicago Fed were all very disappointing."

    "And that’s just in the last week and a bit," said Riddell.
    Horror For US Economy As Data Falls Off Cliff

    mr riddell could've added corporate profits, gas prices, food inflation, consumer confidence...
    Last edited by The Prof; 06-01-11 at 07:41 PM.

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