Messy payrolls

By Felix Salmon
February 4, 2011
today's payrolls report makes no sense.

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On its face, today’s payrolls report makes no sense. The headline news, that just 36,000 jobs were created in January, is undeniably atrocious. It’s much less than the market expected, and it’s much less than even needed to keep up with population growth. On the other hand, there was a whopping great reduction of 0.4 percentage points in the unemployment rate, to 9.0%: that’s great news, seeing as how it was 9.8% in November.

There’s lots of scrambling around this morning from people attempting to reconcile these figures: how could unemployment have fallen by 600,000 people when the labor force was unchanged and barely any new jobs were created?

The main answer, I think, is that there altogether far too many moving parts going into this particular report, and as a result month-on-month changes simply aren’t very useful.

The BLS press release makes this very clear in a box right at the top, which says that

“Changes to The Employment Situation news release tables are being introduced with this release. In addition, establishment survey data have been revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors. Also, household survey data for January 2011 reflect updated population estimates.”

The effects here are large and unpredictable: the total number of people holding jobs in December 2010, for instance, was revised down by a whopping 452,000 — but despite that, the official December 2010 payrolls number now shows an even bigger month-on-month rise than it did before. More generally the size of the total civilian labor force was revised downwards by 504,000, almost half of which came from the Latino population. That has all manner of knock-on effects: the BLS warns that “data users are cautioned that these annual population adjustments affect the comparability of household data series over time.”

This is a messy report, then — even messier than you’d expect from a monthly data series which is mainly valued for its speed as opposed to its accuracy. At the margin, it’s bad for markets, which concentrate on the headline payrolls number, and it’s good for politicians, who tend to concentrate on the headline unemployment number. But for anybody who’s neither a trader nor a politician, it’s a noisy series which is best treated with a whopping great amount of salt — especially in January, and especially also when any big-picture message is so murky.

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Comments
11 comments so far

Nothing mysterious at all, Felix. Hundreds of thousands of red-blooded Americans are putting themselves into cryogenic states of suspended animation until such time as Jeff Immelt and other titans of industry can create an adequate number of high-paying green jobs for them.

The locations of these sites are top secret, but if you ask nicely someone from the BLS(sh*t) will give you directions. Bonus: your house will be foreclosed on while you’re away but your credit report will have already recovered and you can re-enslave yourself with 2020 Bernankedonk dollars. HeeHaw!

Posted by LadyGodiva | Report as abusive

Too many whoppings.

Posted by WHS | Report as abusive

“More generally the size of the total civilian labor force was revised downwards by 504,000, almost half of which came from the Latino population.”

Perhaps immigrants (both documented and not) going home? That wouldn’t be a surprising trend.

Changes in self-employment could also explain some of the discrepancies.

Posted by TFF | Report as abusive

LadyGodiva –

Your comment reminded me of something =)
(Hitchhiker’s Guide to the Galaxy / Douglas Adams)

“Dead?” said the old man. “Good gracious no, we have but slept.”

“Slept?” said Arthur incredulously.
“Yes, through the economic recession you see,” said the old man, apparently unconcerned about whether Arthur understood a word he was talking about or not.
“Er, economic recession?”
“Well you see, five million years ago the Galactic economy collapsed, and seeing that custom-made planets are something of a luxury commodity you see…”
He paused and looked at Arthur.
“You know we built planets do you?” he asked solemnly.
“Well yes,” said Arthur, “I’d sort of gathered…”
“Fascinating trade,” said the old man, and a wistful look came into his eyes, “doing the coastlines was always my favourite. Used to have endless fun doing the little bits in fjords… so anyway,” he said trying
to find his thread again, “the recession came and we decided it would save us a lot of bother if we just slept through it. So we programmed the computers to revive us when it was all over.”

Posted by DanHess | Report as abusive

Hummm…..here we are in the information age, wihout much meaningful information. But we do have a lot of “spin” out there, don’t we?

Mr. David Stockman (President Reagans Budget Director) did an interview on CNBC on Thursday 2/4 that was very critical of the BLS and these reports. The interview speaks for itself and should be available from CNBC. The interview has been ignored by the main media outlets (I only discovered it via a blog at zerohedge.com)

It’s unfortunate that as an investor my confidence in most government statistics (especially the US Federal Reserve and the Treasury) is gone.

Posted by Missinginaction | Report as abusive

It’s not that confusing..look at the Civilian Participation Rate from the BLS….64% which it hasn’t seen since 1982…fittingly it has retraced all the gains since Reaganomics and the assault on prudent financial management.

Posted by csodak | Report as abusive

The population is older today than it was in 1982, so a labor force participation rate of 64% doesn’t mean quite the same thing as it did then.

Unfortunately no one statistic tells the whole story. A two-parent household with one job is richer than two one-parent households with a single job between them. A single mother in her 20s without a job is likely worse off than a single woman in her 60s without a job. And wealth must always be measured against commitments (especially debt payments).

Many economic shifts trace back to demographic changes, and it can be very difficult to identify those that stem from other causes in the rats nest of confounding variables.

Posted by TFF | Report as abusive

Our US economy is still on life support: Interest rates at zero and near zero; Big US corporations hoarding $2 trillion of cash as well as receiving Fed supported low and no interest money; the job expansion not even covering the number of new entrants into the labor market– which is around 90,000 people per month; And ever expanding forclosures by the Big corporate (pro-AIG) banks. Another shoe soon to drop– commercial loans! The “extend and pretend” of the bad loans will continue as long as the banks get 0% money and buy t-bills at 3.5%! Therefore economic life support for the upper crust and much fewer jobs for the rest of us!

Posted by NewExaminer | Report as abusive

Seems like only NewExaminer is aware of what’s REALLY going on.

The Administration is the biggest bunch of Wall Street-kowtowing crooks on the planet and all the incredible data or messy as Salmon describes them are MANUFACTURED by them. Look at the inflation numbers, anyone with a bit of common sense know they don’t add up.

GOD bless America.

Posted by doctorjay317 | Report as abusive

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Posted by cuscoperutrav05 | Report as abusive

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Sunset Peru Limited is a Peruvian travel Agency based in Cusco that offer Peru travel packages with the most amazing tours in Peru, like Inca trail, Machu Picchu
http://www.sunsetperulimited.com

Posted by cuscoperutrav05 | Report as abusive
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