Understand the Numbers

Here’s the explanation of what’s going on with today’s employment report, U.S. Unemployment Rate Drops in January,

Economists had predicted that retail hiring would pick up because holiday employment was well below normal. This meant that fewer seasonal workers were laid off in January.

In other words, this is an adjusted employment number. USUALLY there is a lot of retail hiring for the Christmas shopping season, so they adjust for a large number of layoffs in January. Obviously there wasn’t as much hiring this year, so there were 100,000 or so fewer layoffs in January. Adjusting for the 100,000 expected layoffs makes it look like the retail sector is strong now. Everyone knows it isn’t.

Here’s another story that talks about this, U.S. jobless rate falls to 5.7%.

Because of the way the government adjusts the figures for seasonal factors, both December’s loss and January’s gains in retail are probably illusory. Read more about the seasonal problems.

That last reference is to this story, Job growth could be an illusion.

When the government reports its monthly numbers, it adjusts them for seasonal factors to allow economists and us interested amateurs to see underlying trends more clearly. But sometimes the seasonal adjustments serve only to cloud the issue.

For instance, retail hiring typically soars in November and December as retail outlets get ready for the holiday rush. The seasonally adjusted government data tries to smooth out that seasonal bump, so that normal seasonal hiring would appear as zero job growth in the reported data.

But if the normal seasonal patterns are disrupted, the number becomes distorted. That’s what happened this year.

UPDATE – The first story changed since I posted this morning. The first story now has this quote,: instead of the one above

Holiday hiring was well below normal, meaning fewer seasonal workers were laid off in January. That means seasonal adjustments accounted for January’s large gain, economists said.

“The big swing of 101,000 jobs in January was statistical, not real,” said Joel Naroff, president and chief economist of Naroff Economic Advisors.