The Job Market: Far Worse Than It Appears
The familiar items in the government's Employment Situation Summary on Friday were bad enough:
- The unemployment rate increased for the second straight month, this time to a seasonally adjusted 9.1%.
- The seasonally adjusted number of workers employed increased by only 54,000. After taking prior-month downward revisions into account, only 15,000 more Americans were working in May than were working in April.
Both numbers were "unexpectedly" poor, even after prognosticators had two days’ warning to downwardly adjust their estimates courtesy of payroll giant ADP, whose employment report on Wednesday showed only 38,000 seasonally adjusted private-sector jobs added.
If you think that's bad, wait until you see the real numbers.
What? Yes, I'm redundantly telling you that the numbers routinely reported out of the Bureau of Labor Statistics (BLS) do not represent what actually happened in any given month, because they, as already noted, are seasonally adjusted.
To be clear, I'm not accusing BLS of cooking the books, and there's nothing wrong with seasonally adjusting data. Doing so is a time-honored statistical technique for smoothing out information which fluctuates throughout the year. From all appearances, the methodology BLS uses to generate its seasonally adjusted data is statistically valid and has been consistently applied. In my view, despite the limited value of seasonally adjusted data in the current economic environment, I don't want the bunch currently in the White House to get anywhere near the idea of revising how things are done (and no, I don't believe they've had a chance to corrupt the process yet, though it could be a second-term agenda item).
In normal times, it's usually acceptable for data users to stick with seasonally adjusted (SA) information while avoiding the adventure of delving into and analyzing the raw, not seasonally adjusted (NSA) stuff. But these are not normal times. We're at the three-year point of the POR (Pelosi-Obama-Reid) economy, an appellation I applied in early July 2008, when I recognized that the economy was fundamentally changing, and not for the better. In abnormal times such as these, you cannot be sure that the SA data adequately reflects what's happening in the raw NSA information.
The following chart showing NSA and SA job additions and losses in the month of May during the past 11 years, both overall and in the private sector, will demonstrate the raw data's current importance:
Going all the way back to 1955, May has been a month when net employer hires have been positive, usually by a large amount. Heavy-hiring months like March, April, and May make up for ones like January and July, when the workforce usually significantly contracts.