Tuesday, September 27th, 2016

Fun with jobs numbers

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Donna Cole looks behind the last set of jobs numbers on the federal level and sees job losses, not gains.

Let’s look at some “real” numbers. Here, NPR’s Planet Money, hardly a conservative news outlet, explains that the 163,000 jobs gained number is bunk and in fact we lost jobs;

“Everyone (including us, NPR) is saying this morning that the U.S. economy gained 163,000 jobs last month. Strictly speaking, this is a lie.”

“In fact, the U.S. economy actually lost 1.2 million jobs last month. There were 134.1 million jobs in June, and 132.9 million jobs in July. Why the massive gap between the number everybody is reporting and the actual number?”

“There are huge seasonal fluctuations in employment that occur in a predictable way, year after year. Retailers staff up before Christmas, and lay people off in January. Public school districts staff up in the fall — and let people go in July, after the school year ends.”

“To account for this, the government releases “seasonally adjusted” jobs numbers every month. The basic idea is to correct for these predictable fluctuations.”

Wonkblog, a liberal economics blog, explains this further;

“The U.S. economy lost 1.2 million jobs between June and July. But that’s not how it got reported. When the Bureau of Labor Statistics released its jobs figures for July, it said the economy gained 163,000 jobs. So what gives?”

“According to the bureau (Bureau of Labor Statistics or BLS), the economy essentially lost 163,000 fewer jobs than one would’ve expected, given seasonal trends. That’s a sign of a (slowly) recovering labor market. So BLS reported it as a 163,000 gain in jobs.”

So, this widely reported job growth is actually because the country lost fewer jobs than expected. It is an error in the BLS’s prediction model and doesn’t correlate to real growth. The real indicator of job growth is the unemployment rate which ticked up last month from 8.2 to 8.3%. If job growth was really going in the right direction this number wouldn’t be going the wrong way.

So, okay, we’re dealing with “seasonally adjusted” jobs numbers. That should give us a more accurate picture of the economy, right? Not so fast.

This report from CNBC says that unemployment claims are rising (by.05% last week), but because they have gone up less than expected in the last month this is somehow positive news (Sort of like the President’s “great” job growth numbers from July). When unemployment claims are rising it is never good news and correlates with the rising unemployment rate. However, this part of the story helps to understand the BLS’s last jobs report:

“Weekly jobless claims rose less than expected last week, but the data continue to be influenced by distortions from seasonal auto shutdowns.”
“Temporary plant shutdowns by automakers for annual retooling cause wide swings in claims data in July, which makes it difficult to get a clear picture of the labor market’s health.”

“The model used by the government to smooth the numbers for typical seasonal patterns has trouble anticipating the timing of the temporary closures and in addition, some automakers kept production lines running in July.”

The error in the BLS jobs numbers can be found here. Fewer summer layoffs in the auto industry because they are pushing their seasonal retooling layoffs into the fall, the BLS expected this to happen in summer. The CNBC story continues;

“John Challenger (CEO of firm that analyzes jobs numbers) cautioned that layoffs typically slow during the summer months, while the heaviest job cuts historically happen in the fourth quarter. “This may simply be the lull before the storm,” he said.”

In Wisconsin we have a different problem with the monthly jobs report. As I wrote for the MacIver Institute last week, Wisconsin officials have been trying to get the federal government to change the benchmarking for the monthly jobs numbers, and they’re not the only ones.

In a letter to the BLS, Secretary Reggie Newson wrote, “Regrettably, we continue to see indications that the 2012 CES series for Wisconsin- which as you know is affected by the previous benchmarking -continues to deviate from other economic indicators. The first opportunity to rectify this won’t be until the next round of benchmarking in early 2013. We strongly believe the integrity of the CES data series would be dramatically improved if the BLS were to use three quarters of data for its next benchmarking process, as was the practice prior to 2011. Based on feedback from other states, we are not alone in this belief.”

As Newson’s letter indicates, Wisconsin is not alone in this belief. Minnesota officials have also been critical of the monthly BLS numbers. In an interview in May with Minnesota Public Radio, Steve Hine, the director of Labor Market Information for the Minnesota Department of Employment and Economic Development (DEED), said he estimated the CES numbers Minnesota saw in April were 40,000 jobs short.

“So there’s been this growing doubt. In Minnesota, you know this is a rough ball park estimate, we seem to be 40,000 jobs short by this survey compared to this full count that we’re starting to see, and that’s the situation in Wisconsin.”

The full count Hine referred to is the Quarterly Census of Employment and Wages (QCEW), a census of a state’s employers that economists recognize as more accurate than the CES. Because of the delay in reporting those figures, it is not as well known or as widely cited as the CES. However, the CES only uses a sampling of employers (less than 2% in Minnesota, less than 3.5% in Wisconsin) to estimate what employment as a whole is for a state.

The BLS is looking into changing the benchmarking for the monthly jobs report for the states. However, that does not change the other problems found with the national jobs numbers which are appearing to be even more dismal than first reported.

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