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BLS Misses, Unemployment Rate Rises

Jared Levy


This morning’s BLS report was a bit of a mixed bag.  The headline showed the U.S. adding 157,000 jobs in January, which were roughly 6,000 less jobs than consensus estimates.

The unemployment rate ticked up to 7.9% in January from 7.8% in December with no change in the participation rate (it held steady at 63.6 for the last two months).

Long-term unemployed (those jobless for 27 weeks or more) was mostly unchanged at 4.7 million and accounted for 38.1% of the total unemployed.

At first glance, the report is a disappointment in my eyes, but there are a couple nuances here that are helping markets buy this news:

  • The new year skews the January reading as the benchmarking process and seasonal adjustments are updated.  The total nonfarm employment level for March 2012 was revised upward by 422,000 (424,000 on a not seasonally adjusted basis).  All but 2 months were revised higher in 2012.
  • The November report was revised from +161,000 to +247,000
  • The December report was revised from +155,000 to +196,000.
  • The justification for the increase in the unemployment rate was due to population estimate adjustments.  These adjustment s increased the estimated size of the civilian noninstitutional population in December by 138,000, the civilian labor force by 136,000, employment by 127,000, unemployment by 9,000, and persons not in the labor force by 2,000.

The way I see it, there are a ton of moving parts in this report.  Perhaps I need to quiz the BLS on the specifics of revisions and changes to their “seasonal adjustments, benchmarking process and population adjustments” to get the true picture.

As a semi-intelligent American, I am always skeptical of these surveys as I know they are flawed, but the key to comparing them to one another is knowing that the flaws stay the same.  If the measurements and adjustments are fluid, it becomes more difficult to compare one to the other.

What I do know is that the U6 unemployment rate has been unchanged at 14.4% for the last three months and while headlines read 2.2 million jobs added in 2012, we must not forget the changes in the participation rate and all those seasonal adjustments.

Looking at this morning’s BLS report, it shows the participation rate dropping by only 0.1% year over year which isn’t that bad; the report also shows 1.1 million less people in the labor force.

It’s a tough call, but signs do point to slow stable growth in the labor markets and trends have been established.

While I remain cautious, I do think that 150-200k additional jobs per month is all we need to sustain our slow growth higher.  I worry about data integrity, but when compared with other data sets (other than the latest GDP reading), the employment situation is improving and it’s enough to keep the economy going.

Do you agree?  What you think of the growth of employment here in the U.S. in 2012?



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