Wednesday, January 5, 2011

Roubini Spots the Upticking Economy

As I have said many times, Nouriel Roubini is way off on theory, but he is a first class data watcher and I always expected that he would be among the early group of economists that recognize the upturn in the economy. He has done so.

In his Wednesday Note for his Roubini Global Economics, in an article chiefly about Latin America, he writes about the U.S. economy:
The probability of a double dip in the U.S.—a more material risk to this region than any other—has decreased significantly, due in part to quantitative easing together with extensions of unemployment benefits and the Bush-era tax cuts and the introduction of a 2% payroll tax cut.
They'll be plenty more edging by Roubini to a more optimistic outlook about the U.S. economy, but it has finally started.


  1. Hi Robert,

    December's employment data from ADP *appears* to be a statistical aberration.

    In the recently released "Services ISM index", the "Employment Index" *fell* from 52.7 to 50.5.

    Add to this the fact that inventory accumulation *rose* from 51.5 to 52.5, and the price index which *rose* from 63.2 to 70.0, and it is likely that the ADP employment explosion contains major statistical distortions/shenanigans.


  2. (Update I) Here is yet more evidence that the ADP unemployment number cannot be trusted:

    Gallup has found that not only did the unemployment rate increase in December from 9.4% to 9.6%, that disgruntled part-time workers who want full-time work increased from 8.6% to 9.4%, the highest since September, but that the most important metric in a labor force increasingly consisting of part-time workers, underemployment, has surged to 19%, the highest since June!

    Unemployment, as measured by Gallup without seasonal adjustment, increased to 9.6% at the end of December -- up from 9.3% in mid-December and 8.8% at the end of November.

    The percentage of part-time workers who want full-time work increased to 9.4% of the workforce in December -- up from 9.2% in mid-December and 8.4% at the end of November.

    The increase in Gallup's U.S. unemployment rate and the worsening in the percentage of part-time workers wanting full-time work combined to raise underemployment to 19.0% in December from 18.5% in mid-December and 17.2% at the end of November.

    ADP on Wednesday reported that the economy added 297,000 private-sector jobs -- far above the consensus expectation that the government on Friday will report the U.S. economy added 140,000 new jobs overall in December. In contrast, Gallup shows the unemployment rate increasing as companies let go of holiday workers. At the same time, Gallup's Job Creation Index shows monthly average hiring and firing conditions essentially unchanged over the past three months.

    And here is the kicker: as Gallup can not openly accuse the government of manipulating data, it has to apologize on behalf of the BLS of having seasonally adjusted data which skews it (unlike Zero Hedge which openly surmised that the November NFP number was a disaster only to encourage the passage of the latest stimulus, with us also suggesting that the December number will be stellar merely confirming that the stimulus is doing miracles to the "economy"). In other words, the biggest beneficial fudge factor that the government continues to rely on: the various seasonal adjustment (not to mention the birth death model), may well push some imaginary number not grounded in anything close to reality well into the 7 digit range, and result in the S&P jump by a double digit percentage. And as the BLS is wont do to, it will eventually revise the number to something closer to reality, but by then the market will have long forgotten about the most recent manipulation.

    Because the Gallup unemployment measure is not seasonally adjusted, it tends to more accurately reflect what is actually taking place in the U.S. job market -- and may not agree with the government's estimate that is seasonally adjusted. Further, Gallup's data tend to be more up-to-date than the government's because Gallup polls on the unemployment situation continuously. Combined, seasonal adjustments and timing differences likely explain much of the disparity between Gallup's measures of underemployment and unemployment, compared with those reported by others.

    Whatever the government reports about unemployment on Friday, Gallup's U.S. underemployment data for the end of 2010 show that nearly one in five Americans continue to be unemployed or employed part-time looking for full-time work. In turn, this underscores the importance of job creation as a top national priority.