The BLS jobs report hardly ever fails to add excitement. The headline data was sure to disappoint everyone, and the Econintersect view of the data is more like Goldilocks' view of the bears' porridge.
- The real jobs gain comparing February to March is actually smaller than last year, and is low historically. However, the year-over-year comparisons are OK.
- Regardless on any interpretation - the big picture is that jobs growth this month is representative of an economy running at potential. In other words, the jobs growth matches a moderately growing economy. In the coming months, we will see if the previous better than expected employment growth was an illusion.
This BLS jobs report was not bad enough to trigger an expanded monetary policy from the Federal Reserve (bad for markets) or good enough to show the economy was really expanding "better good" (this too is bad for the markets).
This is a summary of the headlines for the March 2012 employment situation which shows comparisons, and illustrates the dashing of expectations:
- BLS reported: 120K (non-farm) and 121K (non-farm private). Unemployment = 8.2% (down 0.1%)
- ADP reported: 209K (non-farm private)
- Market expected: 200K to 230K (non-farm), 8.2% to 8.3% unemployment
- Econintersect's Forecast: 125K (non-farm private)(made in January 2012).
BLS non-seasonally adjusted non-farm payrolls rose 706,000 - historically not good in comparison with pre-recession jobs growth (or even last year).
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Most of the analysis below uses unadjusted data, and presents an alternative view to the headline data.
Those that read my work know I seldom rant - but the decline in the unemployment rate in this jobs report pushed my buttons - for more detail on the of why the BLS headline unemployment data is ignorant: Unemployment Numbers Are for Dummies.
The BLS reported U-3 (headline) unemployment at 8.2% with the U-6 "all in" unemployment rate (including those working part time who want a full time job) declined from 14.9% to 14.5%. Econintersect has an interpretation of employment supply slack using the BLS unadjusted data base, demonstrated by the graph below.
Overall this chart is telling you that there is a question whether the improvements we have been seeing over the last six months are real (see The U.S. Economy Is Producing Too Many Jobs) - and really, the jobs picture when you view the population as a whole, has NOT improved since the end of the recession (regardless of changes in the unemployment rate).
- Econintersect uses employment-populations ratios to monitor the jobless situation. Changes in the base data effect our view of the economy. Below is the Employment / Population ratio - and what it is telling you is that jobs growth is keeping up with population growth (but seemingly no higher).
- In the latest BLS report employment-population ratio declined from 58.6 to 58.5. The employment-population ratio tells you the percent of the population with a job. Each 0.1% increment represents approximately 300,000 jobs. [Note: these are seasonally adjusted numbers - and we are relying on the BLS to get this seasonal adjustment factor correct]. An unchanged ratio would be telling you that jobs growth was around 150,000 - as this is approximately the new entries to the labor market caused by population growth.
The March data returned the rate of growth back to flat - not negative as suggested by the headline data. Many times the comparison to the previous month distorts the real trends - and the growth trend is not negative despite the crappy comparable growth to last month.
- Average hours worked (table B-2) fell from 34.5 to 34.3. A rising number indicates an expanding economy if the employment is also rising. This month's number declined.
- Government employment contracted 1,000 with the Federal Government unchanged - while state governments expanded 2,000 and local governments contracted 3,000.
- The big contributors to employment growth this month were various administrative services (31K), manufacturing (37K), health care (26K), and food/drink services (38.2K). The big drags this month were merchandise stores (32.3K) and employment services (14.2K).
- Manufacturing rose 37,000 and construction fell 7,000.
- Average hourly earnings (Table B-3) rose from an upwardly revised $23.34 to $23.39. Although this is an improvement, earning growth trend remains "less good"
Economic markers used to benchmark economic growth were OK, and well away from recessionary levels.
The transport sector employment was unchanged month-over-month. Specifically, truck transport declined this month - but remains in the range seen over the last 6 months.
The support services industry (including temporary help) was also improved 0.2% month-over-month. Specifically, temporary help declined this month and remains in the growth range seen during the last 6 months).
Econintersect believes the transport sector is a forward indicator. Others look at temporary help as a forward indicator, and this is positive also.
I prefer the ADP data to model the economy in real time (which this month also told me the rate of growth in jobs moderated) as it it is not as noisy as the BLS data. There are many caveats which go with BLS data.
My weekly economic summary has been published on my instablog.