Economic Notes: Snow, Statistics, and a Job-loss Recovery...
2/11/2011
Click here to watch Patrick O’Keefe discuss the January jobs report on Fox Business Network’s
The Willis Report.
By Patrick O'Keefe, Director of Economic Research, J.H. Cohn
Employment
rose slightly in January, largely on private sector gains in manufacturing and business services which were partially offset by declines in construction and transportation and further shrinkage in the public sector.
Unusually heavy snowfall was generally blamed for the month’s paltry jobs gain. While disruptive weather may have contributed to January’s weakness, it hardly explains the preceding 18 months of a job-loss recovery.
Since the recession officially ended in mid-2009, the U.S. has shed jobs, due largely to cutbacks by fiscally-challenged local governments. But even in the private sector, which has added workers for 11 straight months, total employment is only 0.1% above where it stood when the recovery began.
Private employment remains 6.6% below its pre-recession peak even though real Gross Domestic Product (i.e., inflation-adjusted output) has reached an all time high—on the shoulders of a 5.0% increase in productivity since the recession ended.
As a consequence, the employment rate (i.e., the share of potential workers with jobs) remains near its cyclic bottom—an employment deficit of 10 million jobs. Since the downturn ended in mid-2009, the employment rate has been bottom-bouncing, unlike its steady rise during the more robust recoveries after the protracted downturns in the mid-1970s and early-1980s.
The January jobs report contained some positive news, however. The major measures of labor market distress—unemployment, underemployment, discouragement—were all somewhat better than previously reported, in part because the most recent estimates incorporated refinements to the underlying data and methodologies.
The coincidence of the technical “adjustments” and the largest two-month drop in the unemployment rate since 1958 prompted questions about the integrity of the data. (An example can be seen in a recent exchange on Fox Business Network’s The Willis Report.)
Although the questions are understandable, the revisions to the labor market data were routine “housekeeping” (e.g., updating population estimates using more recent vital statistics), not a statistical snow job.
Last month’s stormy weather merely deferred hiring. It did not diminish the demand for workers, which according to the most recent surveys of the Institute of Supply Management continues to increase. As a result, private sector employment may rise by 250,000 in February—or less, if it snows.
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The statements, opinions, and conclusions contained herein are based solely upon the author’s own studies, research, and personal experience. Neither J.H. Cohn LLP nor the author makes any representation or warranty as to the accuracy or completeness of this information. J.H. Cohn LLP and the author expressly disclaim any liability for any loss or damage which may be incurred, of any kind whatsoever, as a result of or arising from the use of any of the information contained herein or reliance on the accuracy or completeness of it.
Patrick J. O’Keefe is director of economic research at J.H. Cohn LLP. He can be reached at pokeefe@jhcohn.com or 877-704-3500.