Jack Dunn - Reclaiming Common Sense

 Jobs Final Four - Jobs, Workers, Participation, Unemployment

March madness is more than a basketball term. "Mad" can mean "seriously good." This month the jobs data should be positively "mad." There are two surveys that are used to create the monthly jobs report. The first survey is the Current Population Survey, or CPS. This survey measure the number of workers in the workforce population, the number of full-time and part-time jobs created (or lost,) and the number of unemployed workers. It is from this data that the unemployment rate and the participation rate are calculated. The second survey is the Current Employment Statistics Survey, or CES data. It is from this data that the "official jobs number" is created. The problem is that each data set is recorded in the non-seasonally adjusted (NSA) format and reported in the seasonally adjusted (SA) format. Another problem is that the seasonal factors used to convert the NSA data to the SA data change from category to category, survey to survey, month to month, season to season, and year to year. All of this means that this column spends a considerable amount of time projecting growth rates and potential seasonal factors so that expectations can be managed.

Last month the February CES data was messaged low. Why would people want lower data reported while we are trying to jump-start the economy? Politics. Last month the official CES worker number was reported at  273,000 private sector jobs added from the downward revision of the January data.  When the prior month's data is revised downward it takes a bigger bounce to compensate. Last month the seasonal factor used to create the SA CES  "jobs" number was the lowest on record since 1980 with regard to the month of February. This low seasonal factor skewed the "jobs" data lower than it would have been under and previous administration (Reagan, Bush 53, Clinton,Bush 43, or Obama. We could have seen a "jobs " number of 312,000 to 453,000 jobs created reported, even after the downward revision to the January data.

The data for May through January were skewed high, in an attempt to bolster the former President's "Jobs Record." The December Jobs Report was deceptive. They could have reported a paltry 34,000 workers added - instead they reported 144,000 private sector workers added.  The December Forecast column explains how President Obama's Streak was not as long in duration as is being reported elsewhere. The January Forecast Column explained how the data for May was revised to show a SA CES Private Sector LOSS and how the data for July, August, September, October and November were all skewed higher than they should have been.

March Means Mad Hiring of Workers. We have only seen one March since 1980 where we did not add any NSA workers - March of 2009. Every other March we have seen real worker growth. January is a firing month. February through July is prime hiring time.   The growth table reflects a reasonable level of growth that could be anticipated, and uses the seasonal factor from 2012 to calculate a possible SA CES number. If we even grow at a rate comparable to 2007, as the economy was reaching its peak, or 2013, 2014, 2015, or 2016 as the Obama expansion was slowing, then we could see over 324,000 SA CES private sector workers added.

Seasonal Factor Limbo - How Low Will It Go? The jobs message can be massaged using deceptive seasonal factors. If you want higher "jobs numbers" then us higher seasonal factors. SA CES = SF * NSA CES. Is it possible that they used a lower seasonal factor this past March, March of 2016, so that they could keep the streak alive and pad future jobs reports on the way to the 2016 election? If the seasonal factor comes in lower than the 1.0102 factor used last year then we know that the data is being manipulated low, again, for President Trump. 

Combining the Growth Rate with Recent Seasonal Factors and we Could add over 300,000 or over 400,000 workers. If we grow at the 2016 pace and use the 2016 seasonal factor then we would add 216,000 workers. If we grow at a similar pace as 2013 then we could add 284,000 workers. If we grow at a 2007 pace but use a 2016 seasonal factor then we would "only" see 282,000 workers added instead of 377,000 workers added.  Expect a seasonally adjusted CES worker number between 240,000 and 280,000. If they used the  2013 seasonal factor then that number could be over 300,000. Do not be surprised if the seasonal factor come in under 1.01027298. We are in the "You Can't Handle the Truth" economy.

March Mean Major Full-time Jobs.  Last month the number of NSA full-time and Part-time Jobs, combined, was the most added for the month of February since February of 2003. We could, and should, see full-time (FT) jobs added at a pace in excess of 650,000 jobs, and possible 700,000 or 800,000. This, of course, will be either ignored or seasonally adjusted down to a "believable" level. We have lost NSA Part-time (PT) jobs four of the past five years, so a loss of PT jobs could be expected. Obamacare has made it easier for employers to hire PT workers than FT workers, so there could be larger PT gains and smaller FT job gains.

March Normally Means Fewer Unemployed Workers. We have seen record low levels of Continuing Claims  Claimants during the past year or two. Last week, with the release of the weekly unemployment claims report was the release of all new seasonally adjusted First-time Unemployment (FTU) claims and Continuing Claims (CC) data. Instead of 1.989 million SA CC claimants being reported a nice round number of 2.000 million claimants was reported.  We also have historically low levels of NSA FTU claimants - low FTU means low CC levels. By the way, President Obama's under 300,000 SA FTU claim streak never started, and with the revisions to the SA FTU data it was even bumpier.

March Means a Lower Unemployment Rate and a Higher Participation Rate. Just as strange seasonal factors have been masking the real NSA CES worker numbers, the participation rate has been artificially lowering the unemployment rate.  While we have recovered full-time jobs since the depth of the recession, and while we did actually add FT jobs to the 2007 levels this past Summer, prior to the election the number of FT jobs was lower than the July 2007 level. We added more potential workers - the workforce participation rate has fallen as a consequence.

The March Participation Rate should be better than March 2016, March 2015 and may break through the 63% level.There has been a considerable amount of discussion how an increasing unemployment rate could be a good thing as "non-participants" started looking for work and started claiming unemployment benefits again. This column has addressed the non-participating unemployed in the "Four Presidents at __ Months" articles.

Are we really at "full-employment?" Full-employment is considered to be when the U-3 unemployment rate is below 5.00%. The number of unemployed workers are factored into the participation rate. The participation rate would be the same for 150 million FT jobs, 150 million PT jobs, or 150 million unemployed workers, or any combination of 150 million jobs/workers. This column has coined a factor called the U-7 unemployment rate where differing levels of participation are compared with differing levels of unemployment for the same months. March 2017 will be compared with March 2009. March 2001, March 1993 and March 1981 when the "Five Presidents, Month Two" column is released.  This is especially important to reference this month as the unemployment rate for March 2017 may drop to a NSA level close to 4.54%. This is important because we had a an unemployment rate of 4.54% during March of 2007. We currently have a February participation rate of 62.73%. March of 2007 that rate was 65.89%.   We would have to have comparable participation rates to compare comparable unemployment rates.

The Economic Final Four: Jobs Final Four - Jobs, Workers, Participation, Unemployment. Net- Net: Expect the number of Full-time Jobs to increase from the February 2017 level. Expect a huge headline number for Private Sector workers added. Some outlets report the non-farm payroll (NFP)  number, such as ADP or other resources. The NFP Number includes government workers. The ADP number is a seasonally adjusted number. Last month the strong ADP number made the Strong-ish Jobs number "more believable." Other items to monitor are the levels of Multiple Job Holders (MJH) which were reported at near record levels last month. Also watch where the jobs are created. There were twelve of thirteen sectors that added jobs last month. We also need to look at the jobs created for men versus those created for women. Last month men were still trying to recover to their July 2007 full-time levels. This is most likely due to the situation where there are fewer jobs in Manufacturing, Mining and Logging, Construction, and Information Technology now than there were during July 2007. These sectors tend to be male dominated sectors.   

The 2% Tipping Point. Here is another thing to consider. When we have seen less than 2% year over year private sector growth for a prolonged period of time we have dipped into recessions. We had been declining for months. January we had 1.57% annual growth. February we edged higher to 1.68%. If we grow at 1.63% then that would be comparable to  March 2011. If we grow at 1.70% that would be comparable to March 2005 . We would add 722,000 or 812,000 private sector jobs, non-seasonally adjusted. This would be comparable to the real growth seen during 2012. We were growing at a rate of 1.83% and 1.98% during March 2013 and March 2014, respectively. We were growing at 2.19% annual just last March, March 2016. All of this means that 300,000 (2005 month to month growth rate) or 400,000 (2011) is within reach if the seasonal factor is not skewed to a record low level.

Watch the seasonal factors.  Expect Participation to increase and unemployment to decrease from the February Levels. Expect Workers and Jobs to soar. Your wait until next Friday for the report should be well worth it.

It's the economy.