Any economist with a modicum of common
sense would recognize that even a tiny change in the seasonal adjustment
factor would mean a giant variance in the headline figure. So
the January SA jobs number cannot possibly reveal any kind of trend
whatsoever—-good, bad or indifferent. But that didn’t stop Beth Ann
Bovino, US chief economist at Standard & Poor’s Rating Services,
from dispatching the usual all is swell hopium:
“Today’s numbers
are about momentum, so while 151,000 new jobs in January is below expectations
and off pace from prior months, the data shows America’s recovery is
continuing. Amid all the global economic turmoil and domestic market gyrations,
positive job growth, the drop in the unemployment rate to 4.9%, and the uptick
in wages show the U.S. is heading in the right direction.”
Actually, it proves none
of those things. For one thing, the January NSA (non-seasonally adjusted) job
loss this year of just under 3 million was 173,000 bigger than last
January—-suggesting that things are getting worse, not better. In
fact, this was the largest January job decline since the 3.69
million job loss in January 2009 during the very bottom months of the Great
Recession.
So are we really “heading in the right direction” as claimed by
Bovino, Zandi and the rest of the Cool-Aid crowd?
Well, just consider two
alternative seasonal adjustment factors for January that have been used by the
BLS in the last five years. Had they used the January 2013 adjustment
factor this time, the headline gain would have been 171,000 jobs; and had they used the 2010
adjustment factor there would have been a headline loss of 183,000 jobs.
We could say in a variant of the Fox News motto—–we report, you
decide. But believe me, you can look at years of seasonal adjustment factors
for January (or any other month) and not find any consistent,
objective formula. They
make it up, as needed……
(Full text at link below)
At the end of the day,
the monthly jobs report is an economic sideshow. The nonfarm payroll part of
it, in particular, is a relic of your grandfather’s economy when most
jobs represented 40-50 hours per week of paid employment on a year round
basis.
You could compare both short-term changes and longer-term trends
because jobs slots where pretty much apples-to-apples units, and the BLS had
not yet invented most of the insane trend-cycle modeling manipulations and
dense and obscurantist birth/death and seasonal adjustment routines that have
turned the report into quasi-fiction.
Likewise, Wal-Mart and the like had not yet invented labor scheduling
by the hour nor did the notion of temp agency and contract employment by the
gig even exist.
As I have suggested before, the world would be far better off if
they simply shut down the BLS. Adding up minimum wage gigs a few hours per week
with full-time employment slots in a factory, as per the establishment
survey, is a completely stupid, useless and profoundly misleading waste of
time.
Similarly, there are
already far more timely, accurate and honest price and inflation indices
published by a variety of private sources.
And if we need aggregated data on employment trends, the US
government itself already publishes a far more timely and representative
measure of Americans at work. It’s called the treasury’s daily
tax withholding report, and it has this central virtue: No employer
sends Uncle Sam cash for model imputed employees or for 2.1 million
seasonally adjusted payroll records that did not actually report for work.
Stated differently, the
daily tax withholding report is the real thing and the whole thing; it captures the labor input of the entire US
economy in real time, and does not get revised and manipulated endlessly over
the course of months and years from its original release.
Why is this important? My colleague Lee Adler has been tracking
the daily withholding reports for more than a decade and knows their details
and rhythms inside-out. He now reports that tax collections are
swooning just as they always do when the US economy enters a
recession.
In fact, his latest report as of February 6th indicates that,
“The
annual rate of change in withholding taxes has shifted from positive to negative. It has grown increasingly
negative in inflation adjusted terms for more than a month. Following on the
heels of a weak December, it is a clear sign that the US has entered recession……..the implied real growth rate is
now roughly negative 4.5% per year……it is the
most negative growth rate since the recession. It follows the longest stretch
of zero growth in several years, This can no longer be considered temporary or
an anomaly. It has all the earmarks of a trend reversal and is getting worse.”
