Smart money believes that BLS statistics are poisonously politicized, which seems reasonable to me. Generally, goes this particular thesis, BLS exaggerates job growth between elections, and exaggerates job losses leading up to elections — when a Republican is in office.
That interpretation has been looking good the past several months, as payrolls have consistently underperformed expectations. On cue, January’s nonfarm payroll numbers have also disappointed:
Feb. 1 (Bloomberg) — The U.S. unexpectedly lost jobs for the first time in more than four years, increasing the odds the economy will fall into a recession and making it likely the Federal Reserve will cut interest rates another half point next month.
Payrolls fell by 17,000 after an 82,000 gain in December that was larger than initially reported, the Labor Department said today in Washington. The jobless rate declined to 4.9 percent from 5 percent in December.
The drop in payrolls, in the wake of tighter credit, a deeper housing slump and a stumbling stock market, is the clearest sign yet that the U.S. expansion is at risk. Payrolls are one of the indicators, along with wages, production and sales, that help determine the start of economic contractions.
“The economy’s growth is slowing and consequently growth in employment is slowing,” said Kevin Logan, senior market economist at Dresdner Kleinwort in New York, who forecast a gain of 25,000. The drop in payrolls “suggests the economy could very well be on the verge of recession.”
Odds of a half-point cut in the Fed’s benchmark rate by the March 18 meeting rose to 82 percent from 68 percent late yesterday, futures showed.
Treasuries erased losses after the report, with yields on benchmark 10-year notes at 3.57 percent at 9:11 a.m. in New York, from as high as 3.66 percent earlier today. Stock index futures surrendered gains, with contracts on the Standard & Poor’s 500 index little changed at 1,378.20, from an increase of as much as 1.3 percent earlier.
None of the 80 economists surveyed by Bloomberg had predicted the decline in payrolls, which was the first since August 2003. The median forecast in the survey projected payrolls would rise by 70,000, compared with an initially reported gain of 18,000 in December. Forecasts of an increase ranged from 5,000 to 160,000.
Love those “pro” economists. What a herd.