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posted on 10 January 2018

Spinning The Employment Number

from Jeff Miller, A Dash of Insight

Investors need an inoculation against the “spinning virus," especially when it comes to employment data. The sources and reports are so complicated that it is easy to find something to prove your point - whatever that might be!

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The table can help you avoid some of the most significant errors. Many people confuse, for example, the time of the data release with the time of events. Here are two examples you will see:

  1. The payroll and household survey results cannot be an outcome of the tax cut legislation. The surveys were done before the legislation was passed.
  2. The initial claims - up to 250K last week - was a report from after the payroll and household survey periods. Whatever the implications of the increase in claims, we will not see it until next month.

You will also see claims of a “big miss" or “big gain" from changes that are well within the sampling error, without even considering the non-sampling error. A deviation of 50 - 70K, either way, means little.

Pundits know this, give lip service, and then proceed as if there is a high level of accuracy.

Many will opine about the seasonal adjustments. Especially those who no experience or training on this subject. It is often easy to make something look wrong based upon a single month.

And finally, the important context is that the jobs report is based upon a net change. Despite the hype, place this report in the context of other economic data. The actual number of jobs created (and lost) in a month is over 7 million. We are only analyzing the froth at the top of the waves.

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