No, I don’t like the latest employment numbers.
The Bureau of Labor Statistics reported today that the number of workers on U.S. nonfarm payrolls, as measured by their survey of establishments, increased by a seasonally adjusted 88,000 workers in April, of which 25,000 were government jobs. On Wednesday, Automatic Data Processing gave its estimate as 64,000 private sector jobs. The ADP estimate is based on actual payroll data, not a survey, and covers twice as many individual businesses as the BLS. When you add in the public employees (64 + 25 = 89), ADP called the nonfarm payroll number essentially spot on this month two days before we heard from BLS.
Unlike many analysts, I also pay attention to a separate employment estimate that comes from the BLS, which is based not on asking businesses how many people are working for them, but instead comes from sending interviewers to pre-selected residential addresses to ask how many individuals at that address are working. This BLS household survey claimed that the number of people working in America fell by 468,000 in April compared to March, on a seasonally adjusted basis.
I favor looking at all these numbers together because one survey can pick up things the other two might miss. One of the blind spots of the BLS and ADP establishment data is that, by definition, they cannot directly measure somebody who’s employed with a company that didn’t exist at the time the survey was set up. One of the ways that BLS tries to correct for this is with their CES Net Birth/Death Model, which tries to estimate what might be going on with new firms that aren’t in the sample on the basis of regular seasonal patterns and what is currently observed for those firms that are sampled. This imputation led BLS to suspect that there were 317,000 new jobs this April that they did not actually observe, which is three times the average absolute monthly adjustment for 2006.
Michael Shedlock and Barry Ritholtz
are deeply skeptical of this birth/death adjustment;
Dash of Insight offers a more balanced defense of the procedure. But I’m reminded of Tim Kane’s claim that the household survey can do a better job of catching turning points than payroll-based measures, for the reason that the birth/death imputations will systematically miss when things are dynamically changing. Yes, we usually see a large number of new jobs from new establishments in April. But did it happen again this year? No way to know from the establishment data alone.
I’ve been advocating combining the three separate estimates (BLS establishment, ADP, and BLS household) with the first regarded as 8 times as reliable than the other two. For April that calculation comes to
(0.8) x (88) + (0.1) x (89) + (0.1) x (-468) = 32,500 new jobs.
With 25,000 of those jobs coming from the government, I’m thinking we could have had essentially zero net job creation from the private sector in April.
Economic Policy Institute calls the April jobs report “a potentially ominous signal that the slowing economy is finally catching up to the job market.” Kash Mansori, William Polley, and Pro-Growth Liberal are all worried as well.
Ah, please, don’t make me put the sad little face back up so soon!