Decidedly Mixed U.S. Jobs Report Emphasizes Importance of Separating Signal and Noise
Guest blog by Dr. Tom Cunningham, Economist and MST Senior Advisor
At first blush, the March U.S. employment report released April 7 appears contradictory. Employers added only 98,000 jobs, about half of what was expected. But the headline unemployment rate fell 0.2 percentage points to 4.5 percent. The numbers are clearly inconsistent, but because the two statistics are generated separately, they often don’t run parallel.
Today’s number of 98,000 comes on the heels of two months of 200,000-plus new jobs, so the quarter taken as a whole looks strong. The breadth of hiring is encouraging, even if the quantities aren’t great: hiring occurred across almost all sectors, except for retail, which lost 30,000 jobs, primarily due to the ongoing shift from in-store to online shopping.
The unemployment rate comes from a large, sophisticated survey of households compiled and submitted to the Bureau of Labor Statistics by the labor departments of each of the 50 states. It examines the supply of labor in the U.S., and generates the various measures of labor utilization and underutilization. Those measures are converted into the six reported unemployment rates. The headline rate, U3, the rate that gets the most attention, is at a very healthy level at 4.5 percent. The broadest measure of labor underutilization, U6, which includes all people who want work and part-time workers who would like full-time employment, fell 0.3 percentage points to 8.9 percent, still high but the gap between the two measures continues to close, forecasting a period of increasing wages.
The payroll number comes from business reports and consequently, unlike the household survey, gets revised as more filings come in over time from various firms. It will be interesting to see what revisions occur to this number in the coming months.
This month’s payroll number is certain to increase attention to that count next month. Today’s report serves best, however, to remind us of the problem of separating the signal from the noise in high-frequency economic data. Our view of the economy remains fundamentally positive.
About the Author
Tom Cunningham holds a Ph.D. in economics from Columbia University and was senior economist with the Federal Reserve Bank of Atlanta from 1985 to 2015. Mr. Cunningham serves as a consultant to MST in the creation and ongoing development of the MST Virtual Economist and is the MST Advisory economics specialist. Tom will be a featured speaker at the 2017 National ALLL Conference in May.
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