Monday, February 6, 2012

US Employment Indicators

January may have marked the transition from a “jobless recovery” to a “job-full expansion” for the US economy. Payroll employment rose 243,000 during the month, the best m/m gain since April 2011. Household employment jumped 847,000 during the month, the best gain since January 2003. Actually, the transition may have started a few of months ago. Over the past five months, payroll employment rose 183,400 per month on average. That follows a soft patch in employment, with payrolls up only 79,750 per month on average from May through August. However, January’s employment report was the first one during the current economic upturn that was strong across the board. Even the Naysayers seem to be at a loss to put a negative spin on this report. The latest employment figures certainly support my Double Recovery scenario. Here are some more thoughts about the latest employment numbers:

(1) The monthly first estimates of payroll employment are prone to large revisions. As a result, I prefer to focus on the revisions of the previous two months. November and December estimates were raised by 60,000. Upward revisions are typical during economic expansions. By the way, do you recall how depressed everyone was by last August’s estimate released on September 2? It was unchanged. The latest revised number now shows a gain of 85,000.

(2) What happened to all those workers in the transportation and warehouse industry who boosted payroll employment by 50,200 during December? They were supposedly mostly temporary workers, who were supposed to be let go in January. That’s why I expected that January’s payroll gain would be around 150,000 rather than 200,000. Well, it turns out that the new seasonal adjustment factors resulting from the annual benchmark revisions smoothed transportation and warehouse payrolls in December to a gain of only 6,700. In January, this category actually rose 13,100.

(3) Birthers need to get a life. Every month, critics of the Birth/Death adjustment claim that it is bogus, especially since it always seems to boost the employment figures, even during recessions. The adjustment is used by the Bureau of Labor Statistics (BLS) to incorporate the impact of business births and deaths. Actual data are available with a minimum lag of nine months. The BLS reports that the actual net birth/death residual for April 2010 to March 2011 was approximately 12,000 below the forecasted amount used in the monthly estimates for the time period. This is a relatively tiny forecasting error. (More for subscribers.)

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