Nothing but good news on jobs (except a bump in unemployment); taking the data with a grain of salt

Today’s monthly payroll report, and yesterday’s weekly unemployment claims report, as well as manufacturing data all point unmistakably in a positive direction.

Reuters (Tim Ahmann ) reports: “March Job Growth Stuns Market”

U.S. employment rose last month at the fastest pace in nearly four years as hiring jumped in a wide array of industries, the government said on Friday in a surprisingly strong report that stunned financial markets. . . .

In the report, the Labor Department said non-farm payrolls climbed a steep 308,000 in March, helped only a bit by the return of workers after a labor dispute at California grocery stores. The gain was the biggest since April 2000 and well above the 103,000 rise expected on Wall Street. . . .

The big jump in payrolls stood in sharp relief to the average gains of around 75,000 new jobs in the prior six months and trimmed the number of jobs lost since Bush took office to a still-hefty 1.8 million. . . .A combined upward revision of 87,000 jobs to January and February payrolls contributed to the report’s positive tone. . . .

While a long-hoped-for rise in manufacturing employment did not materialize, the department said factory payrolls were unchanged last month, finally breaking a string of 43 consecutive monthly declines. Read more

The AP report by Leigh Strope, here from Findlaw, headlined the one negative aspect of today’s report: “Companies Add Jobs, but Unemployment Up“

The nation’s employers added 308,000 new jobs in March, hiring at the fastest pace in four years and providing long-awaited evidence the weak jobs market may be gaining steam.

At the same time, the civilian unemployment rate bumped up to 5.7 percent, the Labor Department reported Friday.

In a separate survey of companies, the figures showed widespread hiring in industries across the economy . . . .

The jobless rate, compiled in a separate survey of households, inched up by 0.1 percentage point from 5.6 percent in February. That’s because more job seekers renewed their searches last month, but were unsuccessful. . . . .

[F]or out-of-work Americans, the economic rebound has been frustratingly slow. In March, there were 8.35 million people unemployed, compared with 8.17 million the previous month. The average duration of unemployment has been more than 20 weeks, a 20-year high.

Jobless workers are increasingly accepting part-time work. The number of people who worked part time for economic reasons rose to 4.7 million in March, up from 4.4 million the previous month. Read more

Yesterday’s Reuters story, “Factories Add Workers, But Inflation Nags”(by Amanda Cooper ) highlighted a few other jobs numbers.

The Institute for Supply Management said the factory sector chugged along at its best clip in nearly 20 years in March. [Here's the full ISM report]

The employment component of ISM’s nationwide manufacturing survey shot up last month, confounding expectations of a pull-back. A separate Labor Department report said new claims for unemployment benefits slipped last week . . . .

[F]irst-time claims for state unemployment insurance slipped 3,000 to 342,000 in the week ended March 27 from a revised 345,000 the prior week, suggesting mild improvement in the labor market. . . . Read more

Here’s the employment paragraph from the ISM report:

ISM’s Employment Index grew for the fifth consecutive month, following a 37-month trend of contraction. . . . The last time the Employment Index registered higher than March’s index was in December 1987 . . . . The 11 industries reporting growth in employment during March are: Miscellaneous; Transportation & Equipment; Industrial & Commercial Equipment & Computers; Apparel; Furniture; Electronic Components & Equipment; Textiles; Chemicals; Instruments & Photographic Equipment; Wood & Wood Products; and Rubber & Plastic Products.

Because the slight increase in unemployment is attributed to more discouraged workers returning to actively seeking work it can sort of be seen as good news, too, as it is a reversal of the negative trend reflected in this story out just yesterday: “Unemployed Dropping Out of Labor Pool” (AP – Leigh Strope, in Atlanta Journal-Constitution)

The share of the U.S. population working or actively seeking a job has fallen to 65.9 percent, the lowest level in 16 years. Economists say the weak jobs market is causing people to give up their searches and drop out of the labor pool at an unusual pace–holding down the unemployment rate . . . .

Americans not actively seeking work when the Labor Department conducts its survey of households are not counted as unemployed. Those people say they have stopped looking because of frustration or personal responsibilities, such as deciding to attend school.

That growing trend has caused the participation rate to fall 1.2 percentage points since the start of the recession in March 2001. This is the first time the participation rate has fallen 27 months into an economic recovery.

“Normally in a recovery the participation rate would rise,” said Sung Won Sohn, Wells Fargo’s chief economist. “People hear about the improving economy and more job opportunities so they actually come out of the woodwork. We are seeing the opposite of what’s been normal in the past. That’s why the jobless rate has really become somewhat of a misleading indicator.” . . .

Older workers are faring best in hiring these days. The participation rate for Americans age 55 and older has been rising consistently during the economic recovery.

“This is the era of the bargain worker–the individual who might require a higher salary but who more than offsets it through better productivity, less need for costly and time-consuming training, offers the ability to mentor and less likelihood of job hopping,” said John Challenger, chief executive of Challenger, Gray and Christmas, an employment research firm.

Many older Americans also are being forced to return to work or delay retirement because of rising health care costs and shrinking nest eggs.

The sharpest declines in labor force participation are among young Americans. Many are deciding to focus on school or to pursue advanced degrees in hopes the labor market will improve. . . .Read more

Keeping it all in perspective, and reminding us to take all economic numbers with a huge grain of salt, is this interesting commentary by Peter Coy in Business Week: “GDP Growth: Are The Numbers Too Rosy? Forget faulty jobs data. An overstated GDP may help explain the economic reality gap”

The economic statistics collected by the U.S. government are probably as honest and accurate as any in the world. Perfect, though, they’re not. Collecting data about the American economy is a boundless challenge on a limited budget. And it’s even harder in periods of dramatic change — like today.

Take the puzzling case of stagnant hiring. Economists have been scrubbing the Labor Dept.’s employment surveys to account for the gap between strong reported growth in gross domestic product and the anemic 61,000-a-month pace of payroll job creation since August. But they’ve been looking in the wrong place: There’s fresh evidence that GDP, the most closely watched economic statistic, may be overstated — and that lackluster job prospects may present a truer picture of what’s happening now than the strong growth number. . . .

Lags between evolving business trends and the data aren’t uncommon. “Anytime you have rapid change in the economy, you’re likely to miss a bit more,” . . . .

Later revisions may bring the jobs and GDP numbers closer together. But for now, slow-growing income figures may paint a more accurate picture of the economy than the zooming GDP numbers. The world starts to make more sense if you allow for the possibility that the economy isn’t growing quite so fast after all. Read more

And jobs may be doing better than some measures suggest, as I’ve indicated in previous posts, bringing the gap between rapid growth and stagnant jobs together from both ends.

Along somewhat similar lines, reminding us these are just statistics attempting to measure a very complex reality, is this from the New York Post (John Crudele): “OOPS! LABOR DEPT. LOST 321,000 AMERICAN JOBS!”

We all know how politically sensitive these [employment and unemployment] figures are, especially in a presidential election year. And I don’t have to tell you how much Wall Street obsesses over them.

Well, what if I told you that the Labor Department made 321,000 jobs disappear in January. If it hadn’t been for this move, Washington would have reported monstrous growth of 433,000 jobs that month instead of a paltry 112,000.

Don’t believe me?

Go to the Labor Department’s website: http://www.bls.gov/web/cesbd.htm. This is a section on the so-called “birth/death model adjustment,” and it’s buried deep in thousands of pages of other facts and figures. . . .

Normally the government comes up with its monthly jobs figures based on surveys of some 160,000 companies and government agencies, which may or may not tell the truth about hiring.

The guesstimates on companies being born or dying are based on an economic model called the “auto-regressive integrated moving average.” . . .

[L]et me give you a couple of bottom lines . . . .

First, take all numbers coming out of the Labor Department with a pillar of salt.

Second, don’t believe what the experts think. . . .

Third, trust only this.

After all the seasonal adjustments (which are now inexplicably done every month), the guesswork on the birth and death of companies, the millions of people who may have stopped looking for work, the offshoring of jobs and dozens of other statistical peculiarities – nobody really knows nothin’ about the current job market. Read more