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Crescenzi: Today's Jobless Numbers Ho Hum Or Dreadful?

For Main Street, today's employment report is absolutely dreadful; for Wall Street it is ho hum.

I have emphasized in recent months the extraordinary degree of preparedness of the financial markets to bad employment data. This week, for example, the financial markets were forewarned of weakness via Wednesday's ADP Employment Report and Thursday's jobless claims, both of which pointed to a massive decline in employment.

Today's data therefore are unlikely to alter recent trends in financial markets, which has been highlighted by range trading in equities, tightening credit spreads, and a stable money market. It is important to remember that these trends have developed amid a substantial increase in monthly job losses.

Attention is best spent on the upcoming fiscal stimulus package and the bank stabilization plan.

Details of the employment report add little color to the headline data except to put an exclamation point on the headlines. There nonetheless are a few details of note. For example, factory losses continue to be disproportionate given how small the factory sector is as a percentage of employment. The factory sector lost 207k jobs in January, the most since 1982 and a sizable loss relative to the 12.7 million now employed in the sector. Factories have shed 1 million jobs over the past year. By comparison, the service-producing sector, which employs 114.3 million people, has lost 1.7 million jobs during the same period, far fewer on a relative basis. One explanation is the relative resilience of consumer spending on services, which actually increased in the fourth quarter of 2008, gaining at a 1.7% pace. That's far better than spending on durable goods, which fell at a 22.4% pace. As bad as the job numbers have been, they would have been even worse if the weakening of consumer spending had been concentrated more heavily in the service sector.

Household employment, which tallies up the employed and unemployed through a survey of households, fell a record 1.239 million in January following a decrease of 806k in December. The divergence to payrolls, which fell 598k in January, probably reflects weakness in self-employment and at small businesses not part of the survey of establishments, the survey that produces the payroll number. A convergence between the figures normally occurs and is therefore a negative in today's report.

Benchmark revisions to data for the 12 months ended March 2008 were small, just 17k on a seasonally adjusted basis, but the findings for the period led to new estimations on job tallies in subsequent months, a total of 311k downward for the period April 2008 through December 2008. In other words, the Bureau of Labor Statistics increased its estimation of job losses for 2008 by 311k based on patterns it captured in its benchmark revision to data for the period ended March 2008. Figures for September and October were revised up, however, by 82k and 43k, respectively, offsetting downward revisions of 13k and 53k to November and December, respectively, bringing the cumulative net revision to the past four months to +59k.

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Tony Crescenzi
Tony Crescenzi

Tony Crescenzi is the Chief Bond Market Strategist at Miller Tabak + Co., LLC where he advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. Crescenzi makes regular appearances on financial television stations such as CNBC and Bloomberg, and is frequently quoted across the news media. He is also the author of the forthcoming book, "Investing from the Top Down," "The Strategic Bond Investor," and co-author of the 1200-page book "The Money Market."Crescenzi is a contributor to RealMoney.com."