Importance (A-F): This release merits a B-.
Source: The University of Michigan.
Release Time: Preliminary: 10:00 ET on the second Friday of the month (data for current month); Final: 10:00 ET on the fourth Friday of the month (data for current month).
The Michigan index is almost identical to the Conference Board Consumer Confidence index, though there are two monthly releases, a preliminary and final reading. Like the Conference Board index, it has two subindices - expectations and current conditions. The expectations index is a component of the Conference Board's Leading Indicators index.
14 abr 2010
Treasury Budget
Importance (A-F): This release merits a D.
Source: U.S. Treasury Department.
Release Time: 14:00 ET, about the third week of the month for the prior month.
Raw Data Available At: www.treas.gov
In Brief
The monthly Treasury budget data follow strong seasonal patterns which produce huge month-to-month fluctuations in the deficit. These fluctuations tell us little about long term budget trends. To the extent that the market analyses the monthly Treasury data, the focus is on year/year changes in receipts and outlays, since the data are not seasonally adjusted. Only in April, the most important month for tax inflows to the Treasury, does the market pay any attention to this report. The data can be predicted with reasonable accuracy by using daily data in the Daily Treasury Statement.
In Depth
The President's Budget
The annual budget process begins in late January or early February with the presentation of the President's budget for the coming fiscal year. The President's proposals serve as an outline for Congress, particularly when the White House and Congress are controlled by the same party. In the 1980s, the conflicting agendas of the President and Congress often resulted in a final budget which bore little resemblance to the President's budget. After a quiet budget year in 1994 when Democrats controlled Congress and the White House, the Republican takeover of the House and Senate has produced more contentious budget battles in 1995 and 1996.
One of the most common misperceptions about the budget process is that the annual budgeting actually covers all federal spending. Though the President's proposed budget will include projections for all federal government outlays, less than half of all spending is actually controlled by the annual budget legislation. Roughly 67% of federal outlays are mandated by "permanent" law. Unless these laws are changed, no legislative review of spending programs funded by permanent law is required in the appropriations process. The same is true of federal receipts, where permanent law does not require annual review of taxation.
Permanent law should not by any means be construed as suggesting true permanence. Permanent laws are changed frequently, with the 1990 and 1993 budget deals being the most recent examples. These recent efforts to reduce the deficit have incorporated both changes in discretionary spending and changes in permanent laws affecting taxes and spending. Such deficit reduction efforts are usually packaged into a so-called Omnibus Budget Reconciliation Act (OBRA). In the absence of these comprehensive deficit reduction efforts, the annual budget review will only deal with discretionary spending which makes up roughly 33% of the budget. It is perhaps one of the better kept secrets in Washington that the annual budget review which seems at the core of the democratic process does not in fact review even half of all federal spending.
The Budget Resolution
Once the President has submitted his budget to Congress, the legislative process begins. Within six weeks of the date that the President presents his budget, each Congressional committee must report to the House and Senate Budget Committees regarding budget estimates for programs overseen by their committee. The Budget Committees then approve a budget resolution based on these estimates. After full House and Senate approval of these resolutions, any differences between the House and Senate versions are worked out in conference committee and then a final resolution is approved by each house. This process is scheduled to be completed by April 15, but is often delayed, as was the case this year. As the budget resolution is only a blueprint for the budget and not actual legislation, it does not require presidential approval.
Appropriations Bills
The real job of budgeting begins after the budget resolution is adopted. The appropriations process is when actual budget authority for discretionary programs is legislated. We have already noted that annual budgeting only covers discretionary programs, which are responsible for just 33% of total spending. Even these discretionary programs are not bundled into one budget package. The annual budget for discretionary spending is actually comprised of 13 separate appropriations bills. The House and Senate Appropriations Committees each include 13 subcommittees which are responsible for the 13 bills. The 13 subcommittees are listed below.
Subcommittees of the House and Senate Appropriations Committees
Agriculture
Commerce, Justice
Defense
District of Columbia
Energy, Water Foreign Operations
Interior
Labor, Health
Legislative Military Construction
Transportation
Treasury, Postal Service
Veterans, HUD, Agencies
As all tax and spending bills must originate in the House, the House Appropriations subcommittees will see the first action in the appropriations process. The 13 bills are crafted individually and do not work their way through the House and Senate on the same timetable. The goal is of course to complete legislation on all 13 bills by the beginning of the fiscal year on October 1. Yet these bills proceed and are approved of on their own, and are not packaged into one comprehensive bill known simply as the budget.
Once a House Appropriations subcommittee approves its bill, the legislation proceeds to the full Committee and then to the House floor. Approval by the House sets in motion the same process in the Senate. Upon approval by the full Senate, differences between the House and Senate versions of the bill are reconciled in conference committee and then a final version of the bill is sent back to the House and Senate floors. Presidential approval of each of the 13 appropriations bills completes the process. When work on the 13 bills is delayed past the start of the fiscal year, Congress and the President must approve of continuing resolutions which fund government programs at the prior year's level until the relevant appropriations bill is signed into law.
One final note about the appropriations process is that the appropriations bills do not set actual outlays for the coming fiscal year, but instead legislate "budget authority." The Office of Management and Budget (OMB) defines budget authority as "the authority to incur legally binding obligations of the Government that will result in immediate or future outlays." Actual outlays may exceed or fall short of budget authority in any given year depending on past budget authority and the duration of a program.
Omnibus Budget Reconciliation Act
In years such as 1985, 1987, 1990, and 1993, Congress has enacted legislation aimed at long term deficit reduction. These legislative efforts occur separately from the annual appropriations process. They may change permanent laws and set caps which affect discretionary spending, but the regular budget process will nevertheless be unchanged. OBRA legislation affects permanent law and is not a substitute for annual budgets. OBRA legislation packages changes in permanent laws which will typically affect both taxation and mandatory spending. The legislative process for OBRA is completely different than the appropriations process. Legislation is still initiated in the House, but is not limited to work by the Appropriations Committee. The House Ways and Means Committee oversees tax law, and thus plays a critical role in OBRA legislation, as does its Senate counterpart, the Finance Committee. Legislation affecting entitlement programs also falls under the jurisdiction of committees other than Appropriations, i.e. proposed Medicare changes would be considered by a House Ways and Means subcommittee on health care.
Supplemental Appropriations
The 13 appropriations bills are not necessarily the last word for the year on federal spending. Supplemental appropriations bills may be approved at any time to provide additional funding for government programs. Tight caps on discretionary spending set by the 1990 and 1993 budget acts require a pay-as-you-go approach to such funding, thus limiting the number of supplemental appropriations. "Emergency" spending circumvents the pay-as-you-go mandate, however, allowing for a variety of supplemental appropriations. Past "emergencies" have covered everything from the Gulf War to extended unemployment insurance to natural disaster relief.
Source: U.S. Treasury Department.
Release Time: 14:00 ET, about the third week of the month for the prior month.
Raw Data Available At: www.treas.gov
In Brief
The monthly Treasury budget data follow strong seasonal patterns which produce huge month-to-month fluctuations in the deficit. These fluctuations tell us little about long term budget trends. To the extent that the market analyses the monthly Treasury data, the focus is on year/year changes in receipts and outlays, since the data are not seasonally adjusted. Only in April, the most important month for tax inflows to the Treasury, does the market pay any attention to this report. The data can be predicted with reasonable accuracy by using daily data in the Daily Treasury Statement.
In Depth
The President's Budget
The annual budget process begins in late January or early February with the presentation of the President's budget for the coming fiscal year. The President's proposals serve as an outline for Congress, particularly when the White House and Congress are controlled by the same party. In the 1980s, the conflicting agendas of the President and Congress often resulted in a final budget which bore little resemblance to the President's budget. After a quiet budget year in 1994 when Democrats controlled Congress and the White House, the Republican takeover of the House and Senate has produced more contentious budget battles in 1995 and 1996.
One of the most common misperceptions about the budget process is that the annual budgeting actually covers all federal spending. Though the President's proposed budget will include projections for all federal government outlays, less than half of all spending is actually controlled by the annual budget legislation. Roughly 67% of federal outlays are mandated by "permanent" law. Unless these laws are changed, no legislative review of spending programs funded by permanent law is required in the appropriations process. The same is true of federal receipts, where permanent law does not require annual review of taxation.
Permanent law should not by any means be construed as suggesting true permanence. Permanent laws are changed frequently, with the 1990 and 1993 budget deals being the most recent examples. These recent efforts to reduce the deficit have incorporated both changes in discretionary spending and changes in permanent laws affecting taxes and spending. Such deficit reduction efforts are usually packaged into a so-called Omnibus Budget Reconciliation Act (OBRA). In the absence of these comprehensive deficit reduction efforts, the annual budget review will only deal with discretionary spending which makes up roughly 33% of the budget. It is perhaps one of the better kept secrets in Washington that the annual budget review which seems at the core of the democratic process does not in fact review even half of all federal spending.
The Budget Resolution
Once the President has submitted his budget to Congress, the legislative process begins. Within six weeks of the date that the President presents his budget, each Congressional committee must report to the House and Senate Budget Committees regarding budget estimates for programs overseen by their committee. The Budget Committees then approve a budget resolution based on these estimates. After full House and Senate approval of these resolutions, any differences between the House and Senate versions are worked out in conference committee and then a final resolution is approved by each house. This process is scheduled to be completed by April 15, but is often delayed, as was the case this year. As the budget resolution is only a blueprint for the budget and not actual legislation, it does not require presidential approval.
Appropriations Bills
The real job of budgeting begins after the budget resolution is adopted. The appropriations process is when actual budget authority for discretionary programs is legislated. We have already noted that annual budgeting only covers discretionary programs, which are responsible for just 33% of total spending. Even these discretionary programs are not bundled into one budget package. The annual budget for discretionary spending is actually comprised of 13 separate appropriations bills. The House and Senate Appropriations Committees each include 13 subcommittees which are responsible for the 13 bills. The 13 subcommittees are listed below.
Subcommittees of the House and Senate Appropriations Committees
Agriculture
Commerce, Justice
Defense
District of Columbia
Energy, Water Foreign Operations
Interior
Labor, Health
Legislative Military Construction
Transportation
Treasury, Postal Service
Veterans, HUD, Agencies
As all tax and spending bills must originate in the House, the House Appropriations subcommittees will see the first action in the appropriations process. The 13 bills are crafted individually and do not work their way through the House and Senate on the same timetable. The goal is of course to complete legislation on all 13 bills by the beginning of the fiscal year on October 1. Yet these bills proceed and are approved of on their own, and are not packaged into one comprehensive bill known simply as the budget.
Once a House Appropriations subcommittee approves its bill, the legislation proceeds to the full Committee and then to the House floor. Approval by the House sets in motion the same process in the Senate. Upon approval by the full Senate, differences between the House and Senate versions of the bill are reconciled in conference committee and then a final version of the bill is sent back to the House and Senate floors. Presidential approval of each of the 13 appropriations bills completes the process. When work on the 13 bills is delayed past the start of the fiscal year, Congress and the President must approve of continuing resolutions which fund government programs at the prior year's level until the relevant appropriations bill is signed into law.
One final note about the appropriations process is that the appropriations bills do not set actual outlays for the coming fiscal year, but instead legislate "budget authority." The Office of Management and Budget (OMB) defines budget authority as "the authority to incur legally binding obligations of the Government that will result in immediate or future outlays." Actual outlays may exceed or fall short of budget authority in any given year depending on past budget authority and the duration of a program.
Omnibus Budget Reconciliation Act
In years such as 1985, 1987, 1990, and 1993, Congress has enacted legislation aimed at long term deficit reduction. These legislative efforts occur separately from the annual appropriations process. They may change permanent laws and set caps which affect discretionary spending, but the regular budget process will nevertheless be unchanged. OBRA legislation affects permanent law and is not a substitute for annual budgets. OBRA legislation packages changes in permanent laws which will typically affect both taxation and mandatory spending. The legislative process for OBRA is completely different than the appropriations process. Legislation is still initiated in the House, but is not limited to work by the Appropriations Committee. The House Ways and Means Committee oversees tax law, and thus plays a critical role in OBRA legislation, as does its Senate counterpart, the Finance Committee. Legislation affecting entitlement programs also falls under the jurisdiction of committees other than Appropriations, i.e. proposed Medicare changes would be considered by a House Ways and Means subcommittee on health care.
Supplemental Appropriations
The 13 appropriations bills are not necessarily the last word for the year on federal spending. Supplemental appropriations bills may be approved at any time to provide additional funding for government programs. Tight caps on discretionary spending set by the 1990 and 1993 budget acts require a pay-as-you-go approach to such funding, thus limiting the number of supplemental appropriations. "Emergency" spending circumvents the pay-as-you-go mandate, however, allowing for a variety of supplemental appropriations. Past "emergencies" have covered everything from the Gulf War to extended unemployment insurance to natural disaster relief.
20 mar 2010
Employment Report
Importance (A-F): This release merits an A.
Source: Bureau of Labor Statistics, U.S. Department of Labor.
Release Time: First Friday of the month at 8:30 ET for the prior month
Raw Data Available At: www.bls.gov
In Brief
The employment report is actually two separate reports which are the results of two separate surveys. The household survey is a survey of roughly 60,000 households. This survey produces the unemployment rate. The establishment survey is a survey of 375,000 businesses. This survey produces the nonfarm payrolls, average workweek, and average hourly earnings figures, to name a few. Both surveys cover the payroll period which includes the 12th of each month.
The reports both measure employment levels, just from different angles. Due to the vastly different size of the survey samples (the establishment survey not only surveys more businesses, but each business employs many individuals), the measures of employment may differ markedly from month to month. The household survey is used only for the unemployment measure - the market focusses primarily on the more comprehensive establishment survey. Together, these two surveys make up the employment report, the most timely and broad indicator of economic activity released each month.
Total payrolls are broken down into sectors such as manufacturing, mining, construction, services, and government. The markets follows these components closely as indicators of the trends in sectors of the economy; the manufacturing sector is watched the most closely as it often leads the business cycle. The data also include breakdowns of hours worked, overtime, and average hourly earnings.
The average workweek (also known as hours worked) is important for two reasons. First, it is a critical determinant of such monthly indicators as industrial production and personal income. Second, it is considered a useful indicator of labor market conditions: a rising workweek early in the business cycle may be the first indication that employers are preparing to boost their payrolls, while late in the cycle a rising workweek may indicate that employers are having difficulty finding qualified applicants for open positions. Average earnings are closely followed as an indicator of potential inflation. Like the price of any good or service, the price of labor reacts to an overly accommodative monetary policy. If the price of labor is rising sharply, it may be an indication that too much money is chasing too few goods, or in this case employees.
In Depth
The employment report is really two reports - the household survey and the establishment survey. These two surveys contain a wealth of timely information which justify this report's status as the most important economic release of the month. This same wealth of information can nevertheless turn into a dearth of knowledge if it is not placed in the proper context.
Household and Establishment Surveys
The household and establishment surveys differ due to the source of the data, as the names suggest. The household survey is a survey of households and the establishment survey is a surveys of businesses. The establishment survey, which is sometimes referred to as the payrolls survey, is favored by the market for a simple reason - it is far more comprehensive. Both surveys attempt to measure employment conditions at the roughly the same point in time - the household survey covers the calendar week which includes the 12th of the month while the establishment survey covers the pay period (be it a week, two weeks, or longer) which includes the 12th. But the establishment survey covers 390,000 businesses which employ 47 million people, while the household survey covers just 50,000 individuals. With a sample size which is 940 times larger than the household survey, it is hardly surprising that the market is more interested in the establishment survey.
Aside from the sample size, the surveys differ in other significant ways. The household survey counts farm workers, the self-employed, unpaid family workers, and private household workers as employed; the establishment survey does not. The household survey can only count one individual as employed once, even if that person holds two jobs. The establishment survey will double count an individual who appears on the payrolls of two companies. There are other, less significant differences, but let's turn now to the statistics produced by the two surveys.
The Establishment Survey
Nonfarm Payrolls
Without question, the single most important piece of data contained in the employment report generally and the establishment survey specifically is nonfarm payrolls. As the name implies, nonfarm payrolls measure the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be quite volatile, occasionally varying by better than 200K from one month to the next. Even with this volatility and the possibility of large revisions to past data, the payrolls figures offer the most timely and comprehensive snapshot of the economy.
Average Workweek
The workweek, also referred to as hours worked, is an often underrated indicator in the establishment survey. The average number of hours worked by employees on nonfarm payrolls is an important determinant of both industrial production and personal income in any given month. The workweek typically sees changes of a tenth or two each month, but can see much larger swings, such as the four tenth decline reported for October. To understand the importance of these changes in the workweek, note that a one tenth decline in the average workweek of 120 mln workers (roughly the current level of employment) results in 12 mln fewer hours worked. To create a similar decline in manhours through a change in employment, payrolls would have to fall 340K. For the purposes of production and income calculations, a one tenth of an hour change in the workweek is equivalent to a 340K change in employment. Needless to say, the workweek data are therefore critical in judging the overall strength or weakness of the employment report.
Aggregate Hours Worked
The aggregate hours worked index simply brings together the two series we just noted. By calculating an index which looks at both employment and the workweek, we get a complete picture of the total hours worked each month. This indicator is seen as a monthly proxy for GDP. By definition, the quarterly change in the amount of goods produced is equal to the change in manhours plus the change in productivity. As productivity is somewhat predictable from quarter to quarter, the aggregate hours worked index provides a helpful monthly read on the overall economy.
Average Hourly Earnings
The last indicator from the establishment survey which is worthy of close inspection is average hourly earnings, which is important for two reasons. Alongside total manhours, the average earnings figure gives us a good indication of personal income growth during the month. Second, the earnings figures are closely watched during periods of strong economic growth for evidence of increasing wage pressures. Such has certainly been the case over the past year, as the market's reaction to the employment data has often turned on the change in hourly earnings and its implications for the inflation outlook.
The Household Survey
The Unemployment Rate
As we noted earlier, the household survey is not nearly as reliable as the establishment survey due to the small size of the survey sample. This survey nevertheless receives attention, primarily because it is responsible for the one figure which is guaranteed to lead the nightly news - the unemployment rate. The unemployment rate demands little explanation, though it is worth noting that the rate can occasionally sees significant monthly changes which are due to flukes in the data. The rate is simply the result of dividing the number of people unemployed (labor force less employed) by the number of people in the labor force.
The problem is that the employment and labor force measures in the household survey are far more volatile than even nonfarm payrolls. The reason, of course, is the small survey sample size. It is therefore useful to look at the labor force and employment figures themselves to determine if changes in the unemployment rate are due to aberrant swings in one or both of these series.
Beyond the basics of tallying up the labor force and employment, the household survey breaks down these totals in every way imaginable - by gender, race, age, type of job, duration of unemployment, and on and on. These breakdowns seldom are of interest to the financial markets. Perhaps the only two exceptions are the discouraged worker and part-time worker measures.
Discouraged Workers
Discouraged workers are people who have dropped out of the labor force because they have become discouraged about their job prospects. During hard times, this statistic is often watched alongside the unemployment rate. If the job situation gets exceptionally bleak, it is possible to see the unemployment rate remaining stable not because people are finding jobs, but because they have given up looking and dropped out of the labor force.
Part-Time Workers
The issue of part time employment has arisen in recent years as many analysts have argued that strong payroll growth reflected the increase in the number of workers holding multiple part-time jobs. Since the payroll data do not differentiate between full and part-time workers, it is possible that a sudden surge in part-time employment which reflected poor full-time job prospects would actually boost payroll growth. In reality, it does not appear that this has happened, as part-time employment has been relatively steady in recent years. This figure nevertheless receives attention from time to time.
The Big Picture
Given the wealth of data contained in the employment report, it is important to take all of these indicators into account when passing judgment on the report. Looking at payrolls along is often misleading, as the workweek, earnings, and household employment measures may be telling a different story. Taken together, however, and taken with the caveats concerning monthly volatility and revisions, the employment report offers the best monthly glimpse of the economy.
Source: Bureau of Labor Statistics, U.S. Department of Labor.
Release Time: First Friday of the month at 8:30 ET for the prior month
Raw Data Available At: www.bls.gov
In Brief
The employment report is actually two separate reports which are the results of two separate surveys. The household survey is a survey of roughly 60,000 households. This survey produces the unemployment rate. The establishment survey is a survey of 375,000 businesses. This survey produces the nonfarm payrolls, average workweek, and average hourly earnings figures, to name a few. Both surveys cover the payroll period which includes the 12th of each month.
The reports both measure employment levels, just from different angles. Due to the vastly different size of the survey samples (the establishment survey not only surveys more businesses, but each business employs many individuals), the measures of employment may differ markedly from month to month. The household survey is used only for the unemployment measure - the market focusses primarily on the more comprehensive establishment survey. Together, these two surveys make up the employment report, the most timely and broad indicator of economic activity released each month.
Total payrolls are broken down into sectors such as manufacturing, mining, construction, services, and government. The markets follows these components closely as indicators of the trends in sectors of the economy; the manufacturing sector is watched the most closely as it often leads the business cycle. The data also include breakdowns of hours worked, overtime, and average hourly earnings.
The average workweek (also known as hours worked) is important for two reasons. First, it is a critical determinant of such monthly indicators as industrial production and personal income. Second, it is considered a useful indicator of labor market conditions: a rising workweek early in the business cycle may be the first indication that employers are preparing to boost their payrolls, while late in the cycle a rising workweek may indicate that employers are having difficulty finding qualified applicants for open positions. Average earnings are closely followed as an indicator of potential inflation. Like the price of any good or service, the price of labor reacts to an overly accommodative monetary policy. If the price of labor is rising sharply, it may be an indication that too much money is chasing too few goods, or in this case employees.
In Depth
The employment report is really two reports - the household survey and the establishment survey. These two surveys contain a wealth of timely information which justify this report's status as the most important economic release of the month. This same wealth of information can nevertheless turn into a dearth of knowledge if it is not placed in the proper context.
Household and Establishment Surveys
The household and establishment surveys differ due to the source of the data, as the names suggest. The household survey is a survey of households and the establishment survey is a surveys of businesses. The establishment survey, which is sometimes referred to as the payrolls survey, is favored by the market for a simple reason - it is far more comprehensive. Both surveys attempt to measure employment conditions at the roughly the same point in time - the household survey covers the calendar week which includes the 12th of the month while the establishment survey covers the pay period (be it a week, two weeks, or longer) which includes the 12th. But the establishment survey covers 390,000 businesses which employ 47 million people, while the household survey covers just 50,000 individuals. With a sample size which is 940 times larger than the household survey, it is hardly surprising that the market is more interested in the establishment survey.
Aside from the sample size, the surveys differ in other significant ways. The household survey counts farm workers, the self-employed, unpaid family workers, and private household workers as employed; the establishment survey does not. The household survey can only count one individual as employed once, even if that person holds two jobs. The establishment survey will double count an individual who appears on the payrolls of two companies. There are other, less significant differences, but let's turn now to the statistics produced by the two surveys.
The Establishment Survey
Nonfarm Payrolls
Without question, the single most important piece of data contained in the employment report generally and the establishment survey specifically is nonfarm payrolls. As the name implies, nonfarm payrolls measure the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be quite volatile, occasionally varying by better than 200K from one month to the next. Even with this volatility and the possibility of large revisions to past data, the payrolls figures offer the most timely and comprehensive snapshot of the economy.
Average Workweek
The workweek, also referred to as hours worked, is an often underrated indicator in the establishment survey. The average number of hours worked by employees on nonfarm payrolls is an important determinant of both industrial production and personal income in any given month. The workweek typically sees changes of a tenth or two each month, but can see much larger swings, such as the four tenth decline reported for October. To understand the importance of these changes in the workweek, note that a one tenth decline in the average workweek of 120 mln workers (roughly the current level of employment) results in 12 mln fewer hours worked. To create a similar decline in manhours through a change in employment, payrolls would have to fall 340K. For the purposes of production and income calculations, a one tenth of an hour change in the workweek is equivalent to a 340K change in employment. Needless to say, the workweek data are therefore critical in judging the overall strength or weakness of the employment report.
Aggregate Hours Worked
The aggregate hours worked index simply brings together the two series we just noted. By calculating an index which looks at both employment and the workweek, we get a complete picture of the total hours worked each month. This indicator is seen as a monthly proxy for GDP. By definition, the quarterly change in the amount of goods produced is equal to the change in manhours plus the change in productivity. As productivity is somewhat predictable from quarter to quarter, the aggregate hours worked index provides a helpful monthly read on the overall economy.
Average Hourly Earnings
The last indicator from the establishment survey which is worthy of close inspection is average hourly earnings, which is important for two reasons. Alongside total manhours, the average earnings figure gives us a good indication of personal income growth during the month. Second, the earnings figures are closely watched during periods of strong economic growth for evidence of increasing wage pressures. Such has certainly been the case over the past year, as the market's reaction to the employment data has often turned on the change in hourly earnings and its implications for the inflation outlook.
The Household Survey
The Unemployment Rate
As we noted earlier, the household survey is not nearly as reliable as the establishment survey due to the small size of the survey sample. This survey nevertheless receives attention, primarily because it is responsible for the one figure which is guaranteed to lead the nightly news - the unemployment rate. The unemployment rate demands little explanation, though it is worth noting that the rate can occasionally sees significant monthly changes which are due to flukes in the data. The rate is simply the result of dividing the number of people unemployed (labor force less employed) by the number of people in the labor force.
The problem is that the employment and labor force measures in the household survey are far more volatile than even nonfarm payrolls. The reason, of course, is the small survey sample size. It is therefore useful to look at the labor force and employment figures themselves to determine if changes in the unemployment rate are due to aberrant swings in one or both of these series.
Beyond the basics of tallying up the labor force and employment, the household survey breaks down these totals in every way imaginable - by gender, race, age, type of job, duration of unemployment, and on and on. These breakdowns seldom are of interest to the financial markets. Perhaps the only two exceptions are the discouraged worker and part-time worker measures.
Discouraged Workers
Discouraged workers are people who have dropped out of the labor force because they have become discouraged about their job prospects. During hard times, this statistic is often watched alongside the unemployment rate. If the job situation gets exceptionally bleak, it is possible to see the unemployment rate remaining stable not because people are finding jobs, but because they have given up looking and dropped out of the labor force.
Part-Time Workers
The issue of part time employment has arisen in recent years as many analysts have argued that strong payroll growth reflected the increase in the number of workers holding multiple part-time jobs. Since the payroll data do not differentiate between full and part-time workers, it is possible that a sudden surge in part-time employment which reflected poor full-time job prospects would actually boost payroll growth. In reality, it does not appear that this has happened, as part-time employment has been relatively steady in recent years. This figure nevertheless receives attention from time to time.
The Big Picture
Given the wealth of data contained in the employment report, it is important to take all of these indicators into account when passing judgment on the report. Looking at payrolls along is often misleading, as the workweek, earnings, and household employment measures may be telling a different story. Taken together, however, and taken with the caveats concerning monthly volatility and revisions, the employment report offers the best monthly glimpse of the economy.
Retail Sales report
Importance (A-F): This release merits an A-.
Source: The Census Bureau of the Department of Commerce.
Release Time: 8:30 ET around the 13th of the month (data for one month prior).
Raw Data Available At: www.census.gov
The retail sales report is a measure of the total receipts of retail stores. The changes in retail sales are widely followed as the most timely indicator of broad consumer spending patterns. Retail sales are often viewed ex-autos, as auto sales can move sharply from month-to-month. It is also important to keep an eye on the gas and food components, where changes in sales are often a result of price changes rather than shifting consumer demand.
Retail sales can be quite volatile and the advance reports are subject to rather large revisions. Retail sales do not include spending on services, which makes up over half of total consumption. Total personal consumption is not available until the personal income and consumption reports are released, typically two weeks after retail sales.
Source: The Census Bureau of the Department of Commerce.
Release Time: 8:30 ET around the 13th of the month (data for one month prior).
Raw Data Available At: www.census.gov
The retail sales report is a measure of the total receipts of retail stores. The changes in retail sales are widely followed as the most timely indicator of broad consumer spending patterns. Retail sales are often viewed ex-autos, as auto sales can move sharply from month-to-month. It is also important to keep an eye on the gas and food components, where changes in sales are often a result of price changes rather than shifting consumer demand.
Retail sales can be quite volatile and the advance reports are subject to rather large revisions. Retail sales do not include spending on services, which makes up over half of total consumption. Total personal consumption is not available until the personal income and consumption reports are released, typically two weeks after retail sales.
Regional Manufacturing Surveys
Importance (A-F): The Philadelphia Fed Index and Chicago PMI merit a B; the rest merit a D.
Source: Varies - Purchasing managers' organizations and Federal Reserve banks.
Release Time: Varies. Philadelphia Fed at 10 ET on the third Thursday of the month for the current month. Chicago PMI on the last business day of the month for the current month.
There are many regional manufacturing surveys, and they tend to be ranked in order of timeliness and the importance of the region. The Philadelphia Fed's survey is first each month, actually coming out during the third week of the month for which it is reporting. Several smaller surveys are then released before the Chicago purchasing managers' report on the last day of each month. A few, such as the Atlanta and Richmond Fed surveys, are released after the NAPM and are of little value. The purchasing managers' reports are measured like the national NAPM - 50% marks the breakeven line between an expanding and contracting manufacturing sector. For the Philadelphia and Atlanta Fed indices, 0 is the breakeven mark.
These surveys can be of some help in forecasting the national NAPM - particularly the Philadelphia and Chicago surveys which are more closely watched due to their timeliness and the fact that these regions represent a reasonable cross section of national manufacturing activities.
Source: Varies - Purchasing managers' organizations and Federal Reserve banks.
Release Time: Varies. Philadelphia Fed at 10 ET on the third Thursday of the month for the current month. Chicago PMI on the last business day of the month for the current month.
There are many regional manufacturing surveys, and they tend to be ranked in order of timeliness and the importance of the region. The Philadelphia Fed's survey is first each month, actually coming out during the third week of the month for which it is reporting. Several smaller surveys are then released before the Chicago purchasing managers' report on the last day of each month. A few, such as the Atlanta and Richmond Fed surveys, are released after the NAPM and are of little value. The purchasing managers' reports are measured like the national NAPM - 50% marks the breakeven line between an expanding and contracting manufacturing sector. For the Philadelphia and Atlanta Fed indices, 0 is the breakeven mark.
These surveys can be of some help in forecasting the national NAPM - particularly the Philadelphia and Chicago surveys which are more closely watched due to their timeliness and the fact that these regions represent a reasonable cross section of national manufacturing activities.
18 mar 2010
Productivity and Costs
Importance (A-F): This release merits a D+.
Source: The Bureau of Labor Statistics of the Department of Labor.
Release Time: 8:30 ET around the 7th of the second month of the quarter (data for quarter prior).
Raw Data Available At: www.bls.gov
Nonfarm productivity and costs provide measures of the productivity of workers and the costs associated with producing a unit of output. During times of inflationary concern, the unit labor cost index in this report can move the market. If productivity is falling, unit labor costs may be rising faster than hourly earnings and other labor cost measures. Because productivity can be quite volatile from one quarter to the next and because the previously released GDP report will give a good indication of productivity growth, this report seldom has a significant impact on the market.
In addition to the preliminary report, a revision to the productivity data is released in the third month of each quarter. As with the preliminary report, the GDP data released prior to the productivity data provide a clear indication of the direction of the productivity revision.
Source: The Bureau of Labor Statistics of the Department of Labor.
Release Time: 8:30 ET around the 7th of the second month of the quarter (data for quarter prior).
Raw Data Available At: www.bls.gov
Nonfarm productivity and costs provide measures of the productivity of workers and the costs associated with producing a unit of output. During times of inflationary concern, the unit labor cost index in this report can move the market. If productivity is falling, unit labor costs may be rising faster than hourly earnings and other labor cost measures. Because productivity can be quite volatile from one quarter to the next and because the previously released GDP report will give a good indication of productivity growth, this report seldom has a significant impact on the market.
In addition to the preliminary report, a revision to the productivity data is released in the third month of each quarter. As with the preliminary report, the GDP data released prior to the productivity data provide a clear indication of the direction of the productivity revision.
13 mar 2010
How to Trade Forex
Trading foreign exchange is exciting and potentially very profitable, but there are also significant risk factors. It is crucially important that you fully understand the implications of margin trading and the particular pitfalls and opportunities that foreign exchange trading offers. On these pages, we offer you a brief introduction to the Forex markets as well as their participants and some strategies that you can apply. However, if you are ever in doubt about any aspect of a trade, you can always discuss the matter in-depth with one of our dealers. They are available 24 hours a day on the Saxo Bank online trading system, SaxoTrader.The benchmark of its service is efficient execution, concise analysis and expertise – all achieved whilst maintaining an attractive and competitive cost structure. Today, Saxo Bank offers one of Europe's premier all-round services for trading in derivative products and foreign exchange. We count amongst our employees numerous dealers and analysts, each of whom has many years experience and a wide and varied knowledge of the markets – gained both in our home countries and in international financial centres. When trading foreign exchange, futures and other derivative products, we offer 24-hour service, extensive daily analysis, individual access to our Research & Analysis department for specific queries, and immediate execution of trades through our international network of banks and brokers. All at a price considerably lower than that which most companies and private investors normally have access to.
The combination of our strong emphasis on customer service, our strategy and trading recommendations, our strategic and individual hedging programmes, along with the availability to our clients of the latest news and information builds a strong case for trading an individual account through Saxo Bank.
Terms of trading are agreed individually depending on the volume of your transactions, but are generally much lower in cost when compared to banks and brokers. Your margin deposit can be cash or government securities, bank guarantees etc. Large corporate or institutional clients may be offered trading facilities on the strength of their balance sheet. The minimum deposit accepted for an individual trading account depends on the account type. Trade confirmations and real-time account overview are built into SaxoTrader, while further account information can be produced in accordance with your specific requirements.
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