Econintersect: Although this post is in advance of the November 2012 BLS Jobs report, there are more reasons than usual to disregard the headline conclusions this month.
- Hurricane Sandy - there was a significant effect on initial unemployment claims. It is difficult to believe there will not be good and bad single month anomalies throughout this report.
- ADP report was skewed heavily to large business being the growth engine this month - the NFIB explains:
Hurricane Sandy’s impact on the jobs numbers is substantial. Although large national firms will not experience much of an employment impact, thousands of small firms along the East Coast were forced to close, large numbers have not re-opened and many consumers in affected areas can’t shop. Segregating the responses in the ‘Sandy States’ from the rest of the U.S. (including western Pennsylvania and New York which weren’t affected), it is clear that there was less hiring and more job loss in areas impacted by the storm. Also, job openings in these states were fewer in number. Looking ahead to the next few months, more owners in impacted states plan to reduce employment compared to owners not affected, although the same percentage plan to create new jobs.
The best overview of the BLS Jobs report comes from Econintersect Contributor Jeff Miller who observed:
There is a list of repeated monthly mistakes by the assembled jobs punditry:
- Focus on net job creation. This is the most important. The big story is the teeming stew of job gains and losses. It is never mentioned on employment Friday. The US economy creates over 7 million jobs every quarter.
- Failure to recognize sampling error. The payroll number has a confidence interval of +/- 105K jobs. The household survey is +/- 450K jobs. We take small deviations from expectations too seriously -- far too seriously.
- False emphasis on "the internals." Pundits pontificate on various sub-categories of the report, assuming laser-like accuracy. In fact, the sampling error (not to mention revisions and non-sampling error) in these categories is huge.
- Negative spin on the BLS methods. There is a routine monthly question about how many payroll jobs were added by the BLS birth/death adjustment. This is a propaganda war that seems to have ended years ago with a huge bearish spin. For anyone who really wants to know, the BLS methods have been under-estimating new job creation. This was demonstrated in the latest benchmark revisions, which added more jobs.
It would be a refreshing change if your top news sources featured any of these ideas, but don't hold your breath!
And most importantly, it would be helpful if anyone would realize that the BLS is just one estimate among others -- and perhaps not the best. The bean counter example illustrates this.