Tags: jobs | workers | economy | labor market

Ignore the Bullish Spin on the December Jobs Report

Ignore the Bullish Spin on the December Jobs Report

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Wednesday, 13 January 2016 06:11 AM Current | Bio | Archive


Last Friday’s U.S. jobs report looked impressive at first glance. A “glance” was all it took for both amateur and professional analysts to start celebrating.

If your experience matches mine, daily observation suggests the labor market is far from booming.

I know many hard-working, reliable people who can’t find gainful employment. I know even more under-employed people, working far below their skill level for lack of better alternatives.

Anecdotal experience isn’t hard data, of course. The government compiles information far more rigorously than any of us can. I’m sure the data gnomes at the Bureau of Labor

Statistics do their best to present the findings fairly, but they can’t control how the media reports it.

For instance: The December BLS report showed nonfarm payrolls rising 292,000. Ahead of the release, private sector analysts had estimated only 200,000, so this was a positive surprise.

Now, you might say that 292,000 is a curiously precise number for a nation as vast as the United States. You would be correct, too. BLS agrees with you. Read their footnotes – something few people actually do – and you will see a lot of wiggle room.

The “confidence interval” for the monthly change in nonfarm payrolls is +/- 105,000. The “level of confidence” is 90%.

This means BLS is 90% confident that nonfarm payrolls rose somewhere between +187,000 and +397,000. There remains a 10% chance the correct number is somewhere above or below that range.

As a statistical matter, the 200,000 estimate is no more or less correct than the 292,000 BLS actually reported. Both outcomes are equally probable. Celebration might be in order if BLS had reported 305,000 or more – but it didn’t.

We should also note that 292,000 new jobs, even assuming that number is right, does not necessarily mean 292,000 unemployed people found jobs.

The universe of people available to work is a moving target. Population growth alone adds around 100,000 new workers each month. You can think about that as “break-even” level.

Jobless people don’t go back to work until you get above it.

Another complication is the way BLS classifies multiple jobholders. If you have two or more part-time positions that total 35 or more hours per week, you go in the BLS report as “employed full-time.” This means that 292,000 new jobs might not mean 292,000 people going to work. One person can snag two or three of them.

There’s more.

If the people BLS surveys worked as little as one hour that month, they count as “employed.” They don’t even have to make money. If you start a home business hoping to make money someday, you count as “employed” even though your wages are zero.

I could go on with more examples, but you get the point.

Each monthly employment report is just one fuzzy snapshot. You can’t see much – but that doesn’t stop Wall Street analysts and TV talking heads from confidently telling you what they think it shows.

What do I think it shows? I think the combination of suspiciously high job creation combined with zero wage growth means the labor market is far from normalcy.

People may “look” employed because, for example, they are growing backyard vegetables to sell at the local farmer’s market. That’s a perfectly honorable vocation. Nonetheless, it usually generates less income than the same person could make in a factory or professional occupation, if enough such jobs were open. They aren’t.

We will know the job market is tightening when we see consistently high job creation as well as rising wages.

When will it happen? Ask your Magic 8-Ball. It may be smarter than Wall Street.

Patrick Watson is an Austin-based financial writer. Follow him on Twitter @PatrickW

To read more of his insights, CLICK HERE NOW.

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Last Friday's U.S. jobs report looked impressive at first glance. A "glance" was all it took for both amateur and professional analysts to start celebrating.
jobs, workers, economy, labor market
628
2016-11-13
Wednesday, 13 January 2016 06:11 AM
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