Jack Dunn - Reclaiming Common Sense

Will Real February Worker Growth Be Reported that Way?

Last month we received some exceptionally good jobs and worker data in the January Jobs Report. The problem is that the authors of the report, and the people who adjust the data on a month to month and year to year basis, decided to revise the 2015 Current Employment Statistics (CES) data down and revise the 2016 and 2017 CES data higher. These upward revisions to the data, especially the December 2017 CES data meant that instead of reporting that 452,000 seasonally adjusted private sectors were added to the economy they reported that only 196,000 seasonally adjusted private sector workers were added to the economy.  The jobs report has a second data set that is used to calculate the workforce participation rate and participation rate. The Current Population Survey (CPS) data was unedited except a huge spike in the Workforce Population. A downward revision to the workforce population number for the January 2017 Jobs Report boosted President Obama's final participation number. The bump up in the workforce population during January of 2018, a larger growth rate than November-December would have dictated, reduced the workforce participation rate. The upward revision to the January 2018 population was identical to the downward revision of the January 2017 population. The items that have to be recognized are the growth rates, the seasonal factors, and the revisions to data from prior months.

Expect Private Sector Worker Growth to remain strong. The question is "How strong should we expect the February Private Sector worker growth to be recorded?" Last February we saw an unexpectedly large spike in private sector worker growth. The seasonally adjusted private sector worker number was the basis for President Obama's Private Sector Worker Growth FACT (False Assertion Considered to be True.) This was one of the economic urban legends propagated during the Obama Administration. Consumer confidence is high. Employers are indicating that they will be hiring more workers. We did not see as many January layoffs as we could have seen (there have been non-seasonally adjusted job and worker losses every January since 1981.)

Expect the Season Factor to Fall, again. The Seasonal factor was at its most recent high during February of 2009. The lower the seasonal factor, the lower the the seasonally adjusted value will be reported. This is a big deal. If we grow at the same rate that we grew last year and we use the same seasonal factor then we could expect 222,000 seasonally adjusted CES private Sector workers added to be reported. If we have the 2017 growth rate and the 2015 seasonal factor then we could see 300,000 workers added. The combinations and permutations are such that we could grow faster than we did during 1997 and report a growth rate slower than 2011 when the seasonal factor was 1.0165.

Expect the data to be skewed low, again. There has been a considerable amount of winning during the first year of the President Trump Administration. We saw the best first twelve months of any administration since, and including, President Reagan. The momentum is there. The momentum is there for a higher growth rate than last February. The momentum is there for a lower seasonal factor than last February. If we drop back a little on growth and a little on the seasonal factor then we could see a "weak" value of 135,000. If we kept the same seasonal factor used last February then we could see a value of over 203,000 reported. Expect the unexpected.

Expect another 1 million jobs to be recorded as being created during February. We have seen over 1 million non-seasonally adjusted jobs added to the economy each of the past two Februaries. The problem is that this is not what is reported, if it is reported. We had seen a sizable number of part-time jobs added during the recession as companies recovered and worked within the parameters of the Affordable Care Act. We saw a spike in the number of people working multiple jobs, especially multiple part-time jobs.  Note that we added almost as many full-time jobs during February of 2017 than were added during February 2010 through February 2015 combined. Also note that we added more part-time jobs during February 2017 than we added during the month of February since 2003, excluding 2003 and 2012.

Expect the number of jobs added, seasonally adjusted, to exceed half a million jobs.  This is not the number that is reported. The number that is reported is the CES private sector worker data. The reason that it is important to understand the seasonally adjusted CPS jobs number is that this is what is used, along with the seasonally adjusted unemployed worker number, that is a component of the workforce participation rate that is reported in the media.

Expect the unemployment level to record a drop well over 400,000 workers. The U-3 unemployed worker level is different from the weekly continuing unemployment claims data. Those who are no longer receiving unemployment insurance benefits may have found work or run out of benefits. The percentage of those who receive unemployment benefits is less than the total unemployment rate. The weekly unemployment claims data that is closest to the collection date for the Jobs report was released February 15, 2018 for the first-time unemployment claims data. . The data from the report revealed the lowest ever first-time claims data for the second week of February. The data for the continuing claims data closest to the collection date was released this data was released February 22nd.  While the continuing claims is not the lowest ever for this week of February, it was lower that the second week of February from 1971 through 2017. The continuing claims data was 125,000 claims lower than the same week during 2017.  If 1 in three are receiving unemployment benefits the 375,000 fewer unemployed may be found in the data when it is released. There were 2.486 Million continuing claims during the same week of February 2017.

The data that is used to calculate the workforce participation rate vary by each of its components. The seasonal factor for full-time jobs could be used to skew the data lower. The seasonal factor used to convert the non-seasonally adjusted part-time data could be used to skew that number lower. The seasonally adjusted data for the unemployed worker data "will" skew the unemployment level "higher," that is the level will not drop as much in Governmentland as it will in Reality.

Watch the revisions. There were significant revisions to the October, November and December data last month. This month we may see some revisions to the December and January NSA CES data. If those values are revised higher than last reported then this will bring down the February data. If last month we added 196,000 private sector workers and if we add 222,000 workers this month, then we will have added 418,000 workers during the past two months. If last month's data is revised up to 222,000 then this month's data would be reported at 196,000. If last month's data were revised down to 188,000 then that would give us 230,000 workers added.

Climbing the Jobs Mountain. This column has written extensively on the "Jobs Iceberg" and how when President Obama left office during January 2017 that there were fewer full-time times than were present during July 2007. The mountain will grow this month. Hundreds of thousands of full-time jobs should have  been  added during February. Hundreds of thousands of part-time jobs should have been added during February. More jobs should have been added than unemployed workers have been reduced. People should be returning to the workforce who have been left behind during the "recovery."

Multiple Job Workers should rise substantially. We normally see an increase in the number of workers working multiple jobs during February. We should see a spike in the number of people working two part-time jobs. We may see a spike in the number of people working a full-time jobs and a part-time job. This may negatively impact the participation rate as people who are already in the workforce find additional work while those entering the workforce population are unable to find work.

This jobs report will be "eagerly anticipated." The stock market has been jittery this year. The jobs report "disappointed" most observers last month. It was a huge surprise to me because the growth from the originally reported December values was a huge spike. We are not only seeing jobs created and workers returning to the workforce, we are seeing unemployment at record low levels.  There are considerably more covered insured than there were during 1998 and 2001. There were 117.6 Million covered insured during February of 1997 and 126.8 million covered insured during February of 2001. This year there were 141 million covered insured. This data is significant.  You have to know what to expect in order to understand what we will receive. Will the report be received positively if it "beats expectations?" Will some try and call the report "too good" after years of recovery?

It's the economy.