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John Hussman on the Latest Employment Numbers
By JLP | February 6, 2012
From John Hussman’s latest commentary:
“…it’s useful to understand how the Bureau of Labor Statistics calculated the 243,000 increase in employment that it reported for January. Total non-farm employment in the U.S., before seasonal adjustments, fell by 2,689,000 jobs in January. However, because it’s typical for the economy to lose a large number of jobs after the holidays, largely in retail trade, construction, and manufacturing, the BLS estimated that the “normal” seasonal decline in employment should have been 2,932,000 jobs in January. The difference between the two numbers, of course, was 243,000 jobs, which was reported as an increase in employment. The fact that the size of the seasonal adjustment was more than 12 times the number of reported jobs, and more than 30 times the “beat” in economists’ expectations, should provoke at least some hesitation in taking the number at face value.”
In other words, the unemployment numbers are misleading.
Topics: Economic Indicators | 3 Comments »
February 6th, 2012 at 2:39 pm
“. I’m not suggesting there’s anything nefarious going on here, it’s just that part of what we’re seeing here is most likely a statistical artifact of the adjustment process. …
I certainly don’t want to push that argument to the point of suggesting that recent reports are irrelevant, or that they don’t reflect actual improvements. There is enough conformity across multiple pieces of economic data to conclude that the positive economic performance of late is not purely statistical noise.
…”
No, it means they should be taken with a grain of salt. I would *never* believe a precise number. That said, that was very interesting link, thanks for posting it. I find his discussion and ideas on which indicators mean what, when (ie, what he thinks they actually indicate) is really good food for thought. This, for example, is intriguing : “The real issue is the extent, durability, and “leadingness” of those improvements, where we continue to be adamant that lagging data (such as the unemployment rate) should not be expected to lead. Indeed, job growth has typically been reasonably positive in the 1, 3, 6 and 12 months prior to a recession. Job growth was positive in the month prior to 8 of the past 10 recessions, and in the 3 months prior to 9 of the past 10 recessions. In other words, we shouldn’t expect weak job reports to lead recessions, though the year-over-year growth rate in payrolls invariably drops below 1.5% in the early months of a downturn (a level that we’re still below).”
Note, of course, that all *those* employment numbers are taken from the same sets of formulae as the above ones that are distressing you…
February 6th, 2012 at 4:53 pm
Thanks for the link. I know a lot more that I did last week about how this number is calculated, or guesstimated. Zero Hedge also had an article similar to this one last week. Let’s just say that my faith in the number they come up with is not great.
February 6th, 2012 at 4:56 pm
The numbers do go through a lot of contortions, to adjust for seasonal employment and no telling what else. Do the BLS folks publish the +/- margin of error statistics? Since the numbers are always to the nearest 1000, it leads one to believe that 1000 is their accuracy…I highly doubt they can be that accurate even if they even before the “seasonal adjustments”.