Jack Dunn - Reclaiming Common Sense

Jobs Report Friday is Coming up This Friday.

The former President used to make a big deal regarding the seasonally adjusted Private Sector "Job" Growth number. The problem is that the Current Employment Statistics data that he was using measures the level of workers. He was talking about the private sector levels while the "rest of the media" covers the non-farm payroll number that includes government worker, also seasonally adjusted. The unemployment rate number and the participation rate number are reported from data in the Current Population Survey (CPS.) All of these data have seasonally adjusted (SA) and non-seasonally adjusted (NSA) components. The government lives in Fantasyland (SA) while we live in Reality (NSA.)

This jobs report will be the third for President Trump. The January jobs report data was collected prior to the Inauguration. The February Jobs Report revealed an NSA increase in participation, a a record level of Combined NSA Full-time Job and NSA Part-time Job Creation, and a drop in unemployment. The March Jobs Report told a similar story with a record level of combined NSA FT and PT JOb Creation, an increase in the participation rate and a decrease in the unemployment rate. You did not hear about these strong job numbers because the rest of the world covers the SA CES Worker number and because we have seen a skewing of the seasonal factors used to convert the NSA data to the SA data.The seasonal factor used to convert the February data was the lowest used since 1980. The seasonal factor used for the March data was the second lowest used since 1980. Low seasonal factors mean lower SA worker numbers than could have been reported. Why is consumer confidence so high - we live in Reality not Fantasy and over 2 million NSA CPS jobs have been created during the past two months.

What Can we expect for the April Jobs Report? We tend to see employment rise through July or August. We tend to see the participation rate improve through August and the unemployment rate drop through July or August. This is good news. The Jobs Iceberg May finally be gone.

The Real Private Sector Workers Number Will Surge. We even added jobs during April of 2009 during the steepest decent of the Jobs Recession.We have added 0.80% to 1.11% to the worker level during March since 2010 .  This means that we could add between 800,000 and 1.2 million NSA CES private sector workers this month.

The Seasonal Factor will be skewed. The question is will they skew the seasonal factor to the lowest level since 1980 or to the lowest level since 1980. Will it be the same as last April or April 2004?Maybe they will surprise use and inflate the data as they did during April 2012. Who am I kidding?

The "Fake " Seasonally Adjusted Number May have exceed 300,000 . If the authors of the report use the seasonal factor used during April 2011and we grow at a rate comparable to 2010 or 2014 we could see a number around 222,000 to 326,000. Expect the seasonal factor to be manipulated to keep that number under 300,000. We can't handle winning at this level, yet.

Last April we saw Fewer Jobs Added than Almost Any April since 2003.  Last April was the worst April since 2007 as participation dropped. Remember that last May we saw the Private Sector Worker Streak endafter the June Revisions to the May Data. We were in a slowdown. We added over one million private sector jobs during April 2013 and April 2014. We added 951,000 private sector jobs during April 2015. We have added over 1 million jobs during February and March of this year. Will it be recorded (NSA) and will it be reported (SA) this month?

We will see unemployment drop and participation improve. There really is not much of a question that unemployment peaks for the Spring Market during March and drops through the Summer. There is also not much of a question that participation is at its lowest during either March or April and peaks during July or August.Will we see a flat valley with no change in participation this month? Not if 1 million more people go back to work.The current NSA Participation rate is 62.86%, The March Participation rate was the best March rate since 2014. The Participation curve shows the potential for a participation spike.

Will we return to Full-employment?Fuller employment? You are hearing that at an unemployment rate of under 5.0% that we are at "full-employment." The problem is that last monthgs 4.54% unemployment Rate (U3) that we had a participation rate of 62.86%. We had a similar unemployment rate of 4.54% during March of 2007. The participation rate was 65.89%.If we were at full employment last month were we at "fuller employment" during 2007?

The seasonal factors used to convert the CPS data is all over the place. What will be the net result? If the number of full-time and part-time workers increase as they have during prior years, and the seasonal factors remain relatively stable, then we should see real and "fake" employment levels surge. We should see unemployment drop. The gains in the job levels should more than offset the drop in unemployment levels.Participation should rise - seasonally adjusted, Fantasyland, or Non-seasonally adjusted, Reality.

One Final Thought: Watch the revisions. Last Month was a good month, not a great month, according to the seasonally adjusted CES private Sector worker number. The NSA CES was 122,528,000 and the SA CES was 123,540,000. If the NSA CES grows by 0.98%, as anticipated, then the NSA will be 123.460 million and the SA will be 123.743 million workers. A net gain of 932,000 jobs will be seasonally adjusted to a net gain of 303,000. If last month's data is revised upward, and if the growth is based on its original base, then instead of reporting a gain of 303,000 SA CES private Sector Workers the growth will "only" be 253,000 workers. Upward revisions to prior data causes a "downward" revision to the current data and vise versa.Watch the growth rates. Watch the seasonal factors.

It's the economy.