California, Philly Fed and Employment Data – Details, Details, Details.

Categories: Commentary, Uncategorized |

February 10, 2014

So much going on these days – the Olympics have started (can someone explain why the Opening Ceremony was the day after the games began), the debt ceiling was hit but somehow more time and money was found to get us through until a deal is reached and the White House was able to save the aircraft carrier George Washington that was set to be taken out of commission as part of the sequester.  Oh, and Puerto Rico was downgraded (2x).  Perhaps the markets have grown immune to the First Friday report as it was all but dismissed or, perhaps, it was looked upon as a sign the Fed may ease off its taper and keep the spigot open or that it wasn’t as bad as some suggested (a bit more on this later).  With all of this going on, I will take a quick look at California’s drought situation, provide a look into the Philly Fed’s crystal ball, and follow-up on a promise to peel back the onion on the detailed employment data from December and 2013 that may compel you to take a closer look as to “what’s in your wallet.”

California – “Preaching on the Burning Shore” (emphasis mine; lyrics from what song and band?)

How bad have things gotten in California?  The two maps below provide the visual with the “Exceptional” and “Extreme” drought conditions highlighted in red and orange.  Under the adage, “a picture is worth a thousand words” look at how much worse things have become over the past month.

January 2014                                                      December 2013

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DIVER Analytics, Map Module; National Drought Mitigation Center

Looking more closely at the underlying data, with the January report from the National Drought Mitigation Center, 46 California counties are categorized as experiencing “Exceptional” or “Extreme” drought whereas only 13 were categorized as such on December 2013.  The potential impact on the economy goes well beyond the State.  Something to consider.

Philly Fed – Anemic Growth Predicted

The Philly Fed’s Leading Index predicts the six month growth rate of the State’s Coincident Index.  Again, a picture is worth a thousand words.  The below and the underlying data make clear that the Philly Fed predicts 29 States will have a growth rate of their Coincident Index of less than 2%.  Worth comparing against growth assumptions incorporated in State budgets.

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DIVER Analytics, Map Module; Phil. Federal Reserve.

First Friday and a Closer Look at December and 2013’s County Level Employment Data

As regular readers know, I am not a fan of the First Friday report as I view the snapshot as too small and its importance overstated primarily, I believe, due to our insatiable desire to be provided information no matter how imperfect.  While there were some pretty negative headlines around the report, I did find a few tidbits worth noting (all, of course, taken with a grain of salt as we wait to see the true impact of the end of the long-term unemployment benefits).  According to the BLS, the labor force, labor force participation rate and employment to population ratio all edged up in January.  One can’t help but wonder if any of this change has anything to do with the end of long-term unemployment benefits.

And now to the County level employment data from December and 2013.  Importantly, recall that the December data is pre the expiration of long-term unemployment benefits (on the subject of the impact of the same on the unemployment rate, check out the Opinion Page from Friday’s WSJ about North Carolina).  For the data discussed below, I start with December and then present the 2013 picture.  With the 50th anniversary of the Beatle’s invasion of America, I am not sure one can hum, “It’s Getting Better All the Time.”

I start with a telling measure – Employed as a Percentage of the Population: It is greater than it was one year ago in 1,695 counties, a bit over half of all counties.  Pretty good but are we trending in the right direction?  Appears not.

DIVER Data Services; BLS

Regular readers know that I have a hard time looking at the unemployment rate, being of the view that it tells just part of the story.  I like to get more detail by looking at the Labor Force and the Employed and Unemployed.   Looking back from December 2013 to December 2012, the Labor Force is up in 1,203 counties while the number of employed people is up in 1,698 counties – that is good news – and the number of Unemployed is up in only 463 counties.  Is that difficult to reconcile with the above?  Not when you consider the reason many have left the Labor Force (underemployed — overqualified or working part-time v full time.

This next chart provides a look at 2013 and the number of counties seeing increases in their Labor Force and Number of Employed and decrease in Number of Unemployed from month to month.  Think of this as the breadth of the recovery in employment.  It is uneven indeed but what is worrisome is that the trend for the Labor Force and Number of Employed (again, breadth) is not exactly positive.  And, while the number of Unemployed is declining one has to take notice of how strongly correlated the red and blue lines are.  When one leaves the Labor Force, they are no longer counted as Unemployed!

DIVER Data Services; BLS

As one contemplates their holdings and where economies are likely to get better or worse, it is worth looking at the underlying data to identify locations with positive and negative trends.  DIVER Data Services can perform this analysis for you or deliver the data via FTP and our Analytics users can utilize the Filter Module

Not to be deterred by Mother Nature, after braving missed flights and snow storms, the DIVER team is back on the road.  Gregg and Tim will be in NYC Tuesday and Friday and Mike and Gregg will be in Memphis and St. Louis Wednesday and Thursday.

Have a great week,


Michael Craft, CFA, Managing Director, Credit
Lumesis, Inc.


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