Aug 9
Comparing NFP Surprises (Delayed)
The nonfarm payroll numbers were released by the BLS today (Note: This was written on Friday, but the post was delayed to a DNS attack on Posterous). The headline numbers were much worse than expected, with total jump numbers disappointing by 66 thousand workers (131k jobs lost) and the private sector disappointing expectations by 19 thousand workers (Only 71k jobs gained). On the other hand, average hourly earnings and the average weekly hours of all employees was slightly higher than expected at 0.2% MoM for earnings instead of 0.1% and 34.2 hours worked instead of 34.1 hours.
The markets reacted to this data by selling off. This isn't surprising, as the headline number is what everyone looks at. However, it is interesting to note that the payroll surprises in hourly earnings and average weekly hours amount to be equivalent to an earnings increase of more than 500k in new jobs.
Something is going on here.
1. The headline number is still more important because it is a better predictor of future economic activity.
2. Average weekly hours and hourly earnings are not that meaningful or accurate as more and more of the economically important jobs are no longer based on hourly earnings or weekly hours.
3. Average weekly hours and hourly earnings have rounding issues where the actual surprise only looks large because not enough significant figures are used for the estimates/reports. Maybe economists thought the hourly pay would go up by .013% and it ended up going up by .018%, which is half the effect that the headline numbers suggest).
4. Other revisions are more important than the headline numbers.
The most important of these factors is number 2, as the reasons behind the variations in hours such as the fluctuations in pay to overtime manufacturing workers is definitely less significant in an economy with fewer manufacturing jobs relative to the total number of jobs.
