Another Ugly Jobs Report

Seasonal Adjustment

Benen summarizes the bad news:

The new report from Bureau of Labor Statistics shows the U.S. economy added 113,000 jobs in January, well below economists’ expectations. The unemployment rate dropped to 6.6% – its lowest point since October 2008 – but that’s cold comfort given the overall data, and is likely affected by congressional Republicans’ decision to cut off jobless benefits for the long-term unemployed. As is often the case, there was also a sizable gap between the public and private sectors – in January, businesses added 142,000 jobs, while spending cuts forced 29,000 government job losses.

Felix Salmon uses the chart above, which is from Betsey Stevenson, to cast doubt on the numbers:

[J]ust look at how we got to that 113,000 figure. We took January’s workforce, of 135,396,000 people, and then subtracted December’s workforce, of 138,266,000 people — for a total decrease of 2,870,000 jobs. But we know that the number of jobs in America always decreases in January — even when the economy is surging. It’s cold out, making outdoor jobs very difficult to do, and the Christmas seasonal jobs are all in the past. So the BLS institutes some seasonal adjustments. In this case, it subtracted 880,000 jobs from the December number, and it added 2,103,000 jobs to the January figure.

All of which means that the 113,000 headline figure is, in fact, 135,396,000 + 2,103,000 – 138,266,000 – 880,000. You want to trade on that being 70,000 jobs lower than you thought it would be?

Cassidy largely blames the numbers on bad weather:

The cold snap does bear part of the blame for this dramatic dropoff. When it’s freezing cold, consumers tend to stay indoors, spending falls, and firms tend to put off hiring new workers. The figures that the Labor Department publishes have already been adjusted to take account of normal seasonal variations. But we’ve been experiencing abnormal variations, which must have had some effect.

Jeffrey Sparshott disagrees:

“Weather was a clear drag on December, but this actually reversed in January,” said Morgan Stanley economist Ted Wieseman.

Indeed, nationwide the weather wasn’t that bad. While December registered the coldest temperatures for the month since 2009, the National Weather Service isn’t expecting a dramatically cold January relative to records from the last 120 years. It was warm in the Rocky Mountains and West, balancing conditions in East, a spokeswoman said.

Ylan Mui also doubts that the weather is playing a big role:

So if it’s not the weather, what is it? Why is the labor market still so weak? There are no easy answers to that question. Without weather as a scapegoat, it raises the uncomfortable prospect that the economy’s potential for growth is lower than we would like it to be.

Alan Pyke notes the continued disconnect between public and private sector jobs:

State, local, and federal government payrolls shrank by 29,000 jobs in January, according to the Bureau of Labor Statistics data released Friday, continuing a damaging and historically unusual trend that has undermined the economic recovery throughout the past five years.

Despite spiking briefly during the 2010 Census, the public-sector workforce nationwide isnearly three-quarters of a million jobs smaller than it was when President Obama took office. In that same time, the private sector has added 3.5 million jobs on net, even after accounting for the millions of jobs lost in the economic free fall five years ago

Barry Ritholtz calls the report “mostly meaningless”:

To me, the most fascinating aspect of the employment report is the hoopla leading up to it. It is merely a single monthly data point in an ongoing series, one that 90 percent of the time is almost insignificant.