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Friday, February 4, 2011

When Jobs Stats Are Meaningless - and When the Media Confuses

...Typically always true from November - January imop.
But this one is particularly f***ed up. 

News is reporting that according to BLS only 36,000 jobs were added in January (about 1/4 of what was expected).

Meanwhile, BLS reports the unemployment rate falls by another 0.4% - 2 months in a row - to 9.0%.

Not only of course do we have the holiday season confounding the trends from Dec-January, but we have the huge storms that have racked the country in the past few weeks that may be messing things up.

In any case, it is important to note that BLS reports 2 surveys:
The first is the household survey (which surveys people, duh) - that is where we get the unemployment rate.
The other survey is for businesses and the government - that is where news organizations usually report jobs gained or lost.  (36,000 more employed in Jan. compared to Dec. 2010)

The unemployment rate simply cannot be compared to establishment based employment payroll changes because the two numbers come from 2 completely different surveys, measuring slightly different things:

Reported change in civilian employment from Dec. 2010 to Jan. 2011 (private): 117,000

Reported change in total private non-farm employment from Dec. 2010 to Jan. 2011: 36,000

The unemployment rate comes from the survey of the former statistic, not the latter.  Media does everyone a dis-service by not pointing this out.

The household data shows a very large drop in the labor force (almost 500,000 people) compared to a much lesser drop between November and December - undoubtedly a misleading number due to the holiday season.

So, you know what you should do with all these news reports and the January statistics?  Throw them in the garbage, and wait for February and March.