Jan 04, 2013, 08.13 PM IST
In an interview to CNBC-TV18, Kathy Bostjancic, Dir- Macroeco Analysis, said that they are seeing less firing. When one looks at strictly initial job claims they look at the four week moving average and it continues to be slightly distorted from Hurricane Sandy.
Below is the edited transcript of his interview to CNBC-TV18
Q: What do you make of today's jobs data and what you expect in the big non-farm payrolls number that will be out tomorrow?
A: On the whole I would agree that it’s certainly positive. When one looks at strictly initial job claims we look at the four week moving average. It continues to move lower in other words slight distortion from Hurricane Sandy. With the holiday period initial job claims tend to be bit more volatile. However, the claims continue to trend lower. So, we are seeing less firing. In terms of the ADP it looks as if there could be a bit of a stronger employment gain perhaps for December, particularly in the private sectors. So, hiring is picking up and firing is slowing down.
Roughly the non-farm payroll has averaged about a 150,000 per month. If one looks at private, which takes out the government sector, it is a bit higher 160,000. So, the real key is it doesn't accelerate. The other point I would add is how that then stands up against Gross domestic product (GDP) because most economists and us included are actually looking for the final number for the fourth quarter and that to continue in the first quarter next year. So, would we have a temporary period where employment looks like it is firming but growth is actually weaker.
Q: What do you expect for the unemployment number coming in tomorrow?
A: At Conference Board we don't publish point estimates. However, in general quarterly, if you look at the unemployment rates probably it is going to continue to modestly decline. So, tomorrow we could see the consensus 7.8 percent. We could see another 7.7 percent on the unemployment rate. That would be very much in line with these data. In terms of the non-farm payroll again consensus are looking for about 155,000 increases.
This was probably prior to the ADP number. My suspicion would be those number estimates are going to move a bit higher. The key is whether we see that acceleration. It is interesting that we should start to see the economy struggle maybe only getting 1.5-1 percent growth for the next couple of quarters and payroll picking up, that makes productivity slows.
Our estimate is growth could pick up in the second half of the year. Maybe companies are looking pass that slowdown period saying it is the fiscal drag. Underneath the fiscal drag, the private economy looks good or better. Therefore, we want to keep hiring and we do not want to lose a competitive advantage if the economy picks up in the second half of the year.
Q: You made the point twice about the jobs data looking better even as growth weakens, how sustainable is this pick up in employment if it is there at all. We are facing a serious crisis of confidence when the debt ceiling issue comes u.
A: It is going to be another tough week here dealing with the fag end, the fiscal issues and challenges. You are absolutely right and that along with the fact that payroll, tax cut has been allowed to higher to certainly make it a negative stance on growth. We think it probably should about a percent of underlying trend growth. So, we will be getting 2.5 percent. One gets about 1.5 percent. I think it is only sustainable that if the pace of hiring does pick up and growth picks up in the second half of the year. If it is not then there is a big disappointment at the half of the companies. We could see them having to shed workers. Hopefully that is not the case but that is the big question right now.
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