Jobs Report Friday

The Jobs Report arrived, and the numbers were both good and badd...depending on which survey you are looking at, and what numbers you are focused on. Mortgage Bonds reacted negatively to the release of the numbers, but have since come back near unchanged levels.

The headline number of job creations was -20,000 for January, which was worse than expections of 15,000 jobs gained. This number comes from the Business Survey, aka the Establishment Survey or also called the CES (Current Employment Statistics) Survey. It's so inaccurate that it actually goes by three different aliases. In any event, it surveys about 140,000 businesses and government agancies-although the media will often mistakenly tell you that this survey is of about 300,000 businesses. This survey uses the birth/death ratio to help calculate the headline number of jobs gained or lost, which I have often discussed here on my blog in the past as being susceptible to significant inacuracies in times where the labor market is substantially worsening or improving.

And speaking of inaccuracies, the revisions to recent Business Survey numbers were once again quite large. December's was revised to 150,000 jobs lost, nearly doubling the original report of 85,000 job losses. Although November showed 60,000 additional gains - wait a minute- October's revisions showed another 100,000 jobs lost. And if that weren't enough, the Business Survey threw in a Benchmark Revision, which indicatd that there were an additional 900,000 jobs lost from March 2008 -March 2009 from what was previously reported!

No matter how you slice it, this report was not good!

As you know, I have always explained that there are two important surveys within the Jobs Report, the aforementioned Business Survey with all its aliases, and the Household Survey. As the name might imply, this survey includes actual phone calls made to households. There are about 50 - 60,000 households that are attempted to be contacted. And I have historically put more weight in the reliability of this survey, especially during times when the labor market is significantly worsening or improving.

The CPS or Household Survey gives us the headline Unemployment Rate, which was reported at 9.7%. That's an inprovement over last month's reading of 10.0%. But this survey has its own job creation/loss number,just like the Business Survey does. The media most oten inexplicably ignores this number. However, this morning's media coverage is suddenly highlighting the Household Survey. The Household Survey showed that 540,000 jobs were created during January, which is really good news, and explains why the Unemployment declined in the face of the Business Survey showing job losses. Remember, the Unemployment Rate comes from the Household Survey. It's interesting to see the media suddenly point to the Household Survey data this morning, when just last month, they completely ignored the 590,000 jobs that the Household Survey indicated were lost!

That said, we are taking all this information as a sign of good news for the labot market. Although...it must be factored in that some of the hiring included temporary census workers, which will have an influence on the next several months Job Reports. And that's important, because Fed members will see this report as a step in the right direction. While we know that reports can be volatile from month to month - and there is still much work to be done - the Fed will have an opportunity to see the release of next month's report prior to their next meeting, Rate Decision and Policy Statement. And should the Fed get another favorable batch of data next month, it may be enough to influence them to remove the famous "extended period" comment from their Policy Statement. Remember Fed President Thomas "BBQ" Hoenig already dissented to the use of the "extended period" pharase in the last Policy Statement.

Speaking of the Fed, they purchased $12B in Mortgage Backed Securities last week, bringing the total to $1.173T since the program began in January of 2009. This only leaves $77B in purchases to be made over the next eight weeks - that's less than $10B a week, and far less than what they've been purchasing. CNBC's Steve Liesman went on to rant this morning that there will be no change to mortgage rates after the Fed stops buying. I'll go ahead and take the other side of that bet...and think you should too!