Rosy Report a Ruse
NEW YORK POST CLASSROOM EXTRA
An 8.3% jobless rate?
SOMEDAY, the government is going to put out a good economic report and I’ll be able to say, “Yeah, that really is a good report.” This isn’t that day. Everyone, of course, would be thrilled if 243,000 jobs were actually created in the month of January. Hallelujah!
Remember, we are talking about the month when companies go into hibernation because of bad weather and temporary Christmas jobs end. Jobs aren’t created in January. They are lost.
Yet there it is in the Labor Department release yesterday — “total non-farm payrolls rose by 243,000 in January and the unemployment rate decreased to 8.3 percent.”
A lie? Political manipulation? Or maybe it’s just that most people don’t understand what they’re looking at. The answer is the latter.
Those 243,000 jobs are the total after seasonal adjustments.
The question you should be asking is, what’s the un-tampered-with number before the adjustment?
Glad you asked. The Labor Department reported a loss of 2,689,000 jobs in January.
Seasonal adjustments are intended to smooth out holiday bumps like that. But because of the depth and unusual nature of the nation’s Great Recession, those seasonal adjustments are being skewed.
Here’s how it works: In January 2010, as I said, there was an actual, unadjusted job loss of 2,858,000 jobs.
To make it simple, the government computers were expecting a bigger unadjusted loss than the 2,689,000 jobs because last January’s decline was 2,858,000.
Why weren’t there as many job losses this January? Very likely because the weather throughout the country is a lot milder this year than during the past two Januarys.
A loss of jobs that isn’t as bad as expected turns into a job gain. Does that mean there really are 243,000 new jobs out there? Absolutely not.
Let’s say there are rumors in your company that 300 people are going to be laid off. Instead, management decides to fire just 200.
Two hundred people, of course, have lost their jobs. But, adjusting it for expectations, 100 people didn’t get fired. Using this analogy, the government would say that, on an expectation-adjusted basis, 100 jobs were created. That’s sort of what happened in the January employment report because of seasonal adjustment.
The numbers themselves shouldn’t be changed because continuity from year to year is important for comparisons. But people should be alerted when seasonal adjustments are screwing with the numbers.