Santa Claus and the Easter Bunny are pleasant frauds, designed to sell toys and candy. The latest Jobs Report is an accidental fraud, designed by the Bureau of Labor Statistics (BLS) to describe U.S. labor market.
The just-released December report indicates only 74 thousand jobs were created that month, down 69% from November. Just prior to its release, the futures market was indicating the Dow would gain 60 points when the market opened, because the consensus forecast by economists was that 200 thousand jobs had been created in December. Naturally, the Dow dropped like a rock when this report was released!
In fairness to the BLS, December is one of the most difficult months to estimate, because the holiday season causes wide swings in retail employment. Plus, the survey is easily skewed by bad weather. One analyst estimated that 80 thousand of drop in jobs created from November was due to weather.
More significantly, this report is very inconsistent with other economic data. The latest consumer confidence survey, the ISM non-manufacturing survey, the NFIB report and the ADP report, among others all indicate a strongly improving economy. My prediction is that next month’s Jobs Report will show substantial upward revisions to the December number.
In addition, the unemployment rate dropped from 7.0 percent to 6.7 percent, which is a very large decrease and therefore good news . . . right? Unfortunately, the decrease was due to the wrong reason, i.e., 347 thousand people gave up and quit looking for a job. This is called the Labor Force Participation Rate, and it dropped to 62.8%, which is the lowest in 36 years. That means 37.2% of working-age Americans are being supported by the 62.8% who do work or are looking for work. Republicans spin that is proof people are too lazy to work. Democrats spin that just shows the baby-boomers are retiring and unemployed are going back to school. Neither party spins this as good news.
Just prior to the 2012 election, the BLS released a very strong Jobs Report and was criticized for “cooking the stats” to help President Obama’s re-election. I defended the BLS then and continue to do so. Having attended numerous economic conferences and meeting many BLS economists, I find them too “geeky” and too lost in their numbers to really care. In addition, it would be so apparent if the stats were cooked that no economist in their right mind would do it. The BLS may be wrong, but they are not stupid.
I may not believe the latest Jobs Report, but I do believe the BLS . . . and Santa and the Easter Bunny too!
