Follow up: Employment Is Growing Fast

By Mike Astrachan 09/21/2010

Payroll employment data from the establishment survey show employment growth
in the private sector of less than 100,000 per month this year, leading to the conclusion that
the economy is growing too slowly to reduce unemployment. In contrast, the data from the
less publicized household survey show employment in the private sector growing this year at
almost 300,000 per month. Last month it soared 891,000 thousand.

As noted before in [Employment is Rising Fast] around economic turning point the
household data are more reliable and usually lead the establishment data. For example, in
seven out of eight turning points associated with the last four recessions -- four downturns
around the beginning of the recessions and four upturns around the ends of the recessions
and the beginning of the recoveries -- the peaks and troughs of the household employment
data preceded the corresponding peaks and troughs of the establishment employment data.

Still, to lend credence to the private sector employment data from the household
survey and particularly the outstanding figure for August, it might be useful to look for other,
indirectly supporting data. In very general terms such data are also supportive of the notion
of improved employment gains in August. Thus, the Challenger job cut figures show a
significant drop in August to a new post- recession low. Similarly, according to the
Conference Board, the number of new online help wanted ads, marked a new post-
recession high in August. Some weekly data also point in the same direction, including the
downtrend of initial unemployment claims, from its peak in mid-August. This trend, albeit
still tentative, seems to align with the findings of ISI in its company surveys. These show an
almost vertical rise in sales of temporary and permanent placement companies. All in all it
appears that the August data are what they are and not a fluke.
 The Stock Market

When the August household employment data came out early this month they were
sufficiently strong to conclude that the stock market will break out of its three months
trading range on the upside [ Employment in the US does increase],[ Employment is
Rising Fast]. To the abnormally long list of severe risks discussed earlier, however, one may
have to add the fact that commodity prices -- particularly agricultural, are shooting up. This
may increase inflation in China and cause a delay in easing their policies which the world and
particularly the U.S. need. Or, it may force the hand of the Chinese and cause them to fight
inflation by raising the Yuan, which would be helpful for the rest of the world.

This article was written by Mike Astrachan. You welcome to visit his blog at:
www.mikeastrachan.com