Reclaiming Common Sense

The January Jobs Report brought some surprises in the form of massive Current Employment Statistic (CES) revisions to the seasonally adjusted and non-seasonally adjusted worker levels and a major revision to the Current Population Survey (CPS) population level. Instead of having a huge January Jobs report whereover 400,000 workers could have been reported as having been added to the private sector, only 196,000 private sector workers were added to the economy. Last month the ADP payroll was growing at a rate of 2.27%. This is significant because the growth projections in the ADP Forecast article for this month used this February growth rate and data from prior Februaries to project the strong February ADP Payroll number.

Is the Payroll creation growing or slowing? This column had discussed a 2% tipping point for non-seasonally adjusted (NSA) CES growth rate. Last month the January annual payroll growth rate was 2.27%. It was though t that this month we could see an "all-time" best February growth rate. The growth rate had declined from February 2015 to February 2016 to February 2017. The data for last year bounced higher from that point.  This month there was a huge revision to the data from 2002 through 2017. Now we see that the payroll growth may have slowed between February 2017 and January 2018. How is this possible?

All of the data from last month's report was revised. This morning the ADP report for February was released. The data was significantly different from the January ADP Report. These revisions caused this writer to publish a tweet showing the differences.

  • Feb 2017 was 249k now 280k
  • March 2017 was 255k now 122k
  • April was 148k now 155k
  • May was 253k now 202
  • June was 192k now 154k
  • July was 198k now 203k
  • Aug was 228k now 170k
  • Sep was 96k now 84k
  • Oct was 238 now 161k
  • Nov was 206k now 200k
  • Dec was 242k now 249k
  • Jan was 234 k now 244k
  • February was reported at 235,000 private sector jobs being added.

What's the big deal? Instead of growing 234,000 in January we are falling from 244,000. This "stole" 9,000 jobs from February. The February number could have been reported at 244,000, which would have been comparable to last February's 249,000. Now it is being reported as a decline from last February and this past January.

What difference do the revisions make? The data for the years mean that instead of 2017 being recorded as being better than 2015 and 2016, last year is now slower than 2015 and slightly better than 2016. Instead of it being the second best year since 2003, 2017 rates lower than 2013, 2014, and 2015, as well as lower than 2005 and 2011. It also means that all of the projections were rendered obsolete as the growth rates changed.

Still expect a strong Jobs report this Friday. The revisions that hit the ADP report this February hit the CES data last month. The advance data for the jobs report will be revised this month and next month, and if history is any indication, it will also be revised plenty more times in the months and years to come.  The ADP report indicates that all sectors except Information Technology added jobs during February. This aligns with what is expected for the seasonally adjusted data for the Employment Situation report. This was a good report. The revisions to prior data skews the interpretations for other analysts. The Devil is in the data.

It's the economy.