Market 03/08: Questions about the reliability of US economic data after the NFP report

Summary of New York Fed President Williams' remarks:

Inflation expectations relatively declining + Demand gradually decreasing due to monetary policy.
Fed is responsible for ensuring price stability.

NFP payroll survey from BLS: January figure revised down - Unemployment rate highest in 2 years

Key highlights in BLS NFP labor report

February Non-Farm Payrolls higher than expected but with large downward revision for January

Non-Farm Payrolls (NFP) increase +275,000 jobs in February (far exceeding estimates 198,000).

However, the NFP increase in January was revised down to +229,000 (from +353,000 - down more than 35%).
- Employment report has had 11 consecutive downward revisions in the last 13 reports.

Below, actual full-time jobs decreased -284,000 jobs over the past 12 months.

Job growth concentrated in service sectors services such as: health care, leisure and hospitality, government, transportation and warehousing,…
Sector manufacturing is the only sector recording job losses.

Unemployment rate rises to highest level in 2 years - long-term job losers increase sharply

Unemployment rate (unemployment - U3) in February increased +3.9% (> estimate 3.7%).
Underemployment rate - U6 increased +7.3% (> previous 7.2%).
FYI: U-6 rate includes both workers who have stopped trying to find jobs + part-time workers looking for full-time jobs.

Long-term unemployed workers rate (> 27 weeks) decreased to 18.7%.

Number of permanent job losers (permanent job - blue) increased to highest since November 2021, although number of temporary layoffs (orange) continues to decrease.

Labor force participation rate unchanged at 62.5%=, of which: male decreased to 67.7%, female increased to 57.6%.

Of which, labor force participation rate for prime-age (25-54 years old) increased back to the 5-month high of 83.5%.

Wage growth slowed: labor supply-demand balance is normalizing

Average hourly earnings in February increased +4.3% YoY (= estimate and slightly down from previous month +4.4%).

Month-over-month, average hourly earnings increased +0.1% MoM (< estimate +0.2%).

Excluding payroll gains (the figure is becoming increasingly unreliable - analysis below), slowing wage growth + rising unemployment supports the possibility of early Fed rate cuts.

Market increases bets on Fed rate cuts starting in June.

Quality of BLS Payroll Survey - Discrepancy with Household Survey

Debate on quality of recent BLS payroll survey

(Source: EPB Research)

First, number of new entrants to the survey list significantly down to 27% in 2024 (vs 75% in 2014).

Not only that, number of responses (response rate) from both Payroll and Household Surveys (Establishment and Household Survey) sharply declined:
- Payroll Survey: down from 65% in 2014 to 43% December 2023.

- Household Survey: down from 90% to 70%.

Number of responses collected for data (collection rate) also declined in both the first and last records.

→ In summary: BLS jobs report quality has deteriorated severely since 2014 due to Declining input quality + Low survey response count + Low collected response count.

Growing divergence between establishment survey (NFP survey) and Household Survey

In addition to continuous downward revisions, BLS payroll jobs report also shows large discrepancy with Household Survey:

Household survey shows jobs declined -184,000 in February - far from NFP survey

→ Number of multiple jobholders (part-time) remains at record highs.

Earnings Reports: Broadcom, Costco

Broadcom ER: Stock falls despite revenue beat

Revenue: +34% YoY, reaching 12 billion USD (beat estimates by 240 million USD).
- Semiconductor segment revenue: 7.39 billion USD.
- CEO: "Strong demand for AI data center products is driving growth in Broadcom's semiconductor segment".
Non-GAAP EPS: 10.99 USD (beat estimates by 0.57 USD).

In 2023, Broadcom successfully acquired cloud technology company VMware for 69 billion USD.

FY24 Guidance: Revenue ~50 billion USD (miss estimates by 50.2 billion USD).

Broadcom stock falls after earnings despite positive results
→ Market expects better performance due to AVGO stock's strong growth over the past 12 months (+125%).

Costco ER: Revenue misses despite strong e-commerce growth

Revenue: +6% YoY, reaching 58.4 billion USD (miss estimates by 0.7 billion USD).
Non-GAAP EPS: 3.71 USD (beat estimates by 0.07 USD).
Number of warehouses: 875 (+27 YoY).

Sales compared to the same period last year:

US +4.8% | Company-wide +5.8%.
E-commerce +18.2%.
- In 2023, Costco significantly improved its online shopping system:
  - New mobile app launched in February.
  - Launched Apple Pay for all online customers.
  - Added more merchandise to Costco Next.

Other news:

Bitcoin is trending towards the 70,000 USD mark.
Biden proposes a 5,000 USD tax deduction for first-time homebuyers to address housing affordability issues.