Home > Uncategorized > 2012/12/07: Quick Post: Why US Employment report was bogus

2012/12/07: Quick Post: Why US Employment report was bogus

© 2012 ROHR International, Inc. All International rights reserved.

We found the strong initial equities response to the US Employment report bizarre. Could we have been the only ones considering what was, and what was not, counted? There is also the issue of how the US Unemployment Rate got to 7.70% that we will revisit below. But that initial strong equities response was a clear indication of nothing other than the power of headline numbers to move markets regardless of what the full story might be.

And as bizarre as it might’ve sounded on the initial release, there is a good reason the Bureau of Labor Statistics could tell us that Super Storm Sandy had little or no impact! Based on the fine line statistical methodology, anyone employed on October 13 was counted as employed after Sandy hit on October 29th.  It is indeed accurate because of the reporting period statistical protocols. The November data was drawn from the period between October 13th and November 12th, and any worker who was not off for the entire pay period is counted as employed!!

However, that would mean that the estimates which attempted to incorporate the impact of Sandy were significantly misguided…



…in not likely properly assessing the specific Bureau of Labor Statistics and Household Survey methodology. And as such, estimates of somewhere in the vicinity of 90,000 Non-Farm Payroll jobs gained were naturally lower than they should have been. It also means that the actual impact of the storm on the important northeastern US employment picture will likely show up in the December employment numbers.

While no one can know for sure prior to that update, it would seem that the estimates for November should have been up around the released figure. And that will not even be the case for the more interesting impact in the Household Survey. Its protocol is that anyone who is displaced from employment due to weather related circumstances is still counted as employed!!

So we guess if that major Mayan calendar-predicted disaster turns out to be a global typhoon and tsunami that actually hits on December 21st, if anybody is left to generate the Household Survey on Friday, January 4th we will all still be counted as gainfully employed. What we are seeing today in the markets is the power of headline numbers to drive short-term psychology.

Then there is the manner in which the US Unemployment Rate got down to that 7.70%. Quite simply it was the withdrawal of yet another 350,000 people from the labor force.  What we are seeing is another round of labor force shrinkage in the US, and that does not bode well for the overall economic situation into next year. While he can be a bit strident at times, CNBC’s Rick Santelli explored that aspect this morning.


General Market Observations

Whether today’s now modest equities market gains hold up later on in the session or are significantly pared back or reversed either today or next week will be very interesting. For right now it is notable that the December S&P 500 future is not holding up during Regular Trading Hours (RTH) above Monday’s 1,415-18 ‘outside day’ DOWN Closing Price Reversal. If it manages to push up later today, look for a retest of the pre-election resistance in the 1,425-30 area. Yet if it does not get through there soon, it may remain back at steady-to-lower into today’s Close.

And it must be kept in mind that this is all in the context of still abysmal data elsewhere, reinforced by today’s very weak UK and German Industrial Production. That is reflected in the degree to which neither the govvies nor the US Dollar Index gave up much ground in the face of the initial response from the equities market. It is still going to be an economically troubled 2013 in any event.


With the half point discount March T-note future holding not too far below the 134-00 area lays the basis for an overall escape to the upside above more major 134-08 resistance. Weak sister December Gilt future held 119.30-.00 again on slippage from its test of 120.00-.25, and it is also now above that resistance. And the 70 point discount March Gilt future means it has recovered from a test of mid-118.00 area to trade back above 119.30-.00; also indicating the potential for further gains unless they fail back below those levels sometime soon.

And the December Bund future that expired yesterday was once again holding 142.62-.30 after its stall out last month near 143.50-.80 resistance. That was telling after the completion of the Greek debt deal which should have weighed on the Bund. That is important because that typical early quarterly futures contract expiration saw the March Bund future most atypically trading at a 1.70 premium (usually a full point discount.) Now above all the important August 144.37 lead contract continuation high as well as the mid-November 145.20 March contract congestion, it is already challenging the next interim resistance in the 145.70-.88 area. While there is some further resistance in the low-mid 146.00 area, the bigger resistance is not back until the early June 146.89 all-time futures high.

▪ Foreign exchange has also entered a much more critical phase on the US Dollar Index slippage below its .8000 psychological and technical support. While that was a DOWN Break of sorts, much more significant trend support had moved up on the market since early September into the low-.7900 area: the overall major upward channel since the .7270 May 2011 low. And now that it is pushing back above .8000, any daily Close above last Wednesday’s .8060 high would be a classical Negation of the DOWN Break.

Of course, whether that holds likely also informs our view of the success of the failure of the euro to extend its rally convincingly above EUR/USD 1.3000 this time around (versus September and October.) Not a huge surprise that it should come back under pressure after yesterday’s significant ECB downgrade of the 2013 Euro-zone economic outlook. And much like the US Dollar Index indication above, whether it cracks the interim EUR/USD 1.2860 support will also be a very interesting trend indication. All of this would also seem tied into that broader global economic sentiment on whether the British pound is able to sustain its rally above its GBP/USD 1.6000 area resistance, and whether the commodity currencies can get any more traction at this time in the form of AUD/USD finally sustaining a push back above 1.0450-1.0500.

Thanks for your interest.


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