Truly bizarre employment report
out today. Only 36K new jobs added but the unemployment rate dropped from 9.4% to 9%! They did some population adjustments and the labor force dropped by a half million, so maybe that accounts for some of the weirdness ...
I doubt many of the doomers here are sophisticated enough to understand - or care about - the intricacies of demographics and sampling issues, but in case there's one or two who are, here's a couple interesting links.Calculated Risk
The CPS also showed a decline in the Civilian Labor Force Level by 504,000. Some of this decline was due to a lower participation rate, and some of this decline was due a lower estimate of the Civilian noninstitutional population. In reality the working age population probably increased in January, but the updated population estimate showed a decrease of 185,000 people in the month.
The BLS provides some estimates with and without the change in population control (see Table C. at bottom of the release). Without the change in population control, the CPS would have shown an increase of 589,000 employed people. Also, without the change in population control, the number of unemployed would have fallen 590,000 (U-3). With the update population estimate, the number of unemployed declined 622,000.
So without the change in the population control - the change can be confusing - the CPS showed a surge in employment and a sharp decline in the unemployed, and that is the reason the unemployment rate declined sharply.
And similarly, from the Wall Street Journal
The Labor Department’s bean counters recalculate the size of the population every January. Those new counts, in turn, are used to come up with new estimates for how many Americans are employed, unemployed or not in the labor force. Because of the revisions, Labor Department officials are flashing warning signs to anybody trying to infer too much in the unemployment portion of the monthly jobs numbers.
The Labor Department — using updated Census Bureau data — determined that its 2010 estimates of the size of the population had been 347,000 too high, its estimates of overall employment in 2010 had been 472,000 too high and that its estimates of people who were unemployed or not in the labor force were also off.
If you read all of both articles, the gist is . . . the Census Bureau determined the population - particularly the Hispanic population - didn't grow as fast last year as they had been assuming, so they had to adjust down both the overall population and the size of the workforce. Since the Hispanic population has a higher unemployment rate than average, when they extrapolated their household survey results to the new population figures they got a lower unemployment rate. They did not do this to the December figures, only the January ones. Basically the two months aren't even very comparable to each other since they each have entirely different population assumptions.
They do this every January so I guess we'll have to put up with some flaky results the first month each year.