Pethokoukis

Here we go again! Economists: Employment gains are ‘implausibly high’

Recall all the eyebrows that were raised last month at the huge jump, nearly 900,000 jobs — in the September household jobs survey conducted by the Bureau of Labor Statistics. The last time the economy added that many, it was growing at a white-hot 9.3% — not 2%. And it was way out of line with the more well known payroll survey.

The results led Gallup’s chief economist to say that the “household results should be discounted. … The obvious conclusion is that a new employment measure is needed.”

But in October we had another mega-month, at least according to that survey. Household employment jumped 410,000. Here is the economics team of John Ryding

Conrad DeQuadros at RDQ Economics:

The economic data for October continue to be relatively upbeat as the gain in payrolls and the upward revision to employment growth in the prior two months put the level of payrolls in October some 255,000 above the previously reported level for September.  The employment gains in the household survey (about 1.3 million over the last two months) are implausibly high and we still expect to see an eight-handle on the unemployment rate again before the end of the year. 

Translation: Unemployment is headed back to the 8% level after the election.

20 thoughts on “Here we go again! Economists: Employment gains are ‘implausibly high’

  1. I’m not really sure “implausibly high” is the right term to use here. I mean, if we look at the non-seasonally adjusted numbers (to discount any potential bias inherent in the SA factor), than the October gains this year were just below average, but well within median.

    Gallup’s chief economist is operating off the assumption that is analysis of the economy is correct (and that may be true), and therefore the numbers must be wrong. Is it possible that the numbers are correct and things are better than he may suspect?

    I mean, there seems to be a lot of pushback against the employment numbers lately, but historically, they are quite ho-hum. These aren’t the great numbers you’d want in a recovery, but they are not terrible numbers either. Historically, they are quite average.

    Now, if we want to argue that these numbers should be higher given a stronger recovery, sure, I can see that. But many industries of the US economy are growing at or near historical growth rates, not the least of which is US Industrial Production as a whole. Is it really that implausible, then, that employment is doing the same thing?

    • Jon Murphy,

      The Obama Campaign should give you a Gold Star for effort !

      I haven’t been so dizzy from the spin since I last rode the Tea Cups at Disneyland.

      • Thanks, Tim. Unfortunately, I made the “Public Enemies” list earlier this year when I endorsed Gary Johnson for President, so I doubt a gold star is coming my way.

          • It’s your defense mechanism job. You go into the “obtuse mode” after you’ve been spanked. I’ve been online a long time, and I’m not at all fooled by the ruse. You’re just running away when you’re called out. Which is often.

            If you’re silly enough to believe yourself, by all means, indulge. I really don’t care.

    • Of the industries that haven’t went bankrupt we may be seeing some growing at or near historical growth rates, but more likely due to the drop in competition more than anything else. This still can reflect a net loss in jobs while some industries are rebounding. We can have a strong economy with minimal growth, but the issue is the net number of unemployed living of the welfare of those who are still working. We can’t sustain that trend very long without killing the economy in the long run. We end up like Russia, everyone working, industries busy, but nobody buying or selling anything, and everyone ends up poor. Strong industry, but bankrupt economy. Eventually it all implodes.

      • Lawrence,

        Maybe I am misunderstanding you, but I don’t see how competition has anything to do with it. As businesses die (and thus competition recede), we would see less growth, not more. After all, competition spurs innovation and production.

        Perhaps I was unclear as to what I was saying. Let me expand on my point:

        US Industrial Production, which includes manufacturing, mining, and utilities, is growing at an annual rate of 4.1% (long-term average: 3.7%).

        Retail Sales (deflated, excluding autos and gas) is growing at an annual rate of 2.5% (long-term average: 2.7%).

        US Exports are growing at an annual rate of 7.8% (long-term average: 7.5%).

        So, our industrial side, our consumer side, and our international trade are all growing near their historical rates.

        My question, then, is why is it implausible that employment is rising around its historical rate as well (1.8% annual growth. Long-term average: 1.4%).

        Now, I am not making a judgement call on the strength of employment, nor the recovery. All I am asking is, if the economy is performing at an average pace, why is it “implausible” that employment be doing the same thing?

  2. What is most incredulous, is the idea that even with these tremendous “job creation” numbers… the unemployment rate actually rose. Very interesting.

    • Well, jobs can be created and have a rising employment rate.

      The employment rate is calculated thus:

      UR = (E/LF)*100

      Where
      UR = Unemployment Rate
      E = Employed
      LF = Labor Force

      The key to this is the Labor Force. The Labor Force is not just the number of working-age people in the population. It excludes the following:

      -People not actively searching for a job (housewives, homeless)

      -Institutionalized folks (military, schools, prison)

      -Under the age of 16

      So, the UR can increase if E increases and LF increases by a greater amount (say, a large group of housewives decide they want a job).

      There mere fact that the UR increased does not discount these numbers. There are other factors that need to be taken into account.

  3. SO, what happens when someone, who’s given up on looking for a job is taken out of the statistical mix and then he/she finds a job? I would think this would certainly skew the statistics somehow.

  4. BLS numbers can be manipulated just like poll numbers. Tweak the definition of what a job is or other assumptions and you can get whatever number you need.

  5. The entire way the number is manipulated is a problem. Perhaps we should go with the more accurate workforce participation rate so we can get a handle where we stand as far as people working, unemployed or stopped looking for work. Because those who stop looking for work get dropped from the unemployment rate but show up in the WFP rate. It is a much better gauge of our economy. Then when the rate goes up we will know that more people are working. When we use the unemployment rate it will rise when the economy improves as people return to begin looking for work, it is a poor way to measure our work force.

  6. Don’t forget we’ve been paying into unemplment bene for decades times millions of workers is paying bulk. Pass POTUS jobs plan and Jobs from AFFORDABLE health care to build more hospital for million more customer and med and IT jobs. Strange how number
    Are believe when they are negative and conspiracy when positive. Stop using anything made or constructed or funded by government.

  7. Naturally, Mr. Pethokoukis struggles with any decent BLS report, and the glee he spent days wasting on waxing on the prior numbers that have all been ratcheted up sharply, make his comments all the more ludicrous.

    Oddly too, is his comment about Gallup, whose own unadjusted unemployment rate stands at 7.0% flat:

    http://www.bizjournals.com/phoenix/morning_call/2012/11/gallup-poll-pegs-unemployment-rate-at.html

    Now obviously, the rate itself is not as important as the number of bodies out there collecting paychecks and spending their wages to consume, but again, Jimmy P. is squirming and grasping at straws. When your only argument is to attack the quality of the data, you’ve lost it already.

    And Jimmy P. knows it. Don’tcha Jim?

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