Realist, not conformist analysis of the latest financial, business and political news

The US Jobs Number Ain’t So Bad

Quantum

The Telegraph tells us that the US jobs market is slowing terribly and ain’t this a shame:

The US jobs market has shown signs of a chill, casting a cloud over Donald Trump’s chances of re-election in November.

The labour force slowed by more than expected last month and wages rose at the weakest annual pace since 2018, although unemployment rate was steady at a 50-year low of 3.5pc.

Non-farm payrolls expanded by 145,000 in December, shy of the 160,000 expected by economists and well below the downwardly revised 256,000 increase in November. That figure was lifted by 46,000 production workers at General Motors returning to work after a strike.

This ain’t quite right. For we’ve two different measures of US jobs gains, the official one and the ADP. ADP being a payroll processing firm who go out and count how many payrolls they’re processing. The advantage of their number being that it appears a couple of days before the official one.

And there’s a thing about these two numbers:

Given that we’re talking about samples and surveys, the numbers simply will wander around a little. And given that we’ve two different methods being used here, they’ll wander differently and independently. Which is I think what’s happening here.

The ADP number was low for November, the BLS high. I think the ADP number is high this month and that the BLS will be lower.

What we would like to know is what’s the BLS number going to be and informed comment has it at around 160,000. That is, everyone is expecting some smoothing out of the previous differences in this reading of the runes.

It’s entirely true that 145,000 is lower than 160,000. But then we need to add another little thing about that official jobs number. The error bar is 100,000 either side. That 15,000 difference is not useful information, it’s well inside our simple statistical variation problem.

It’s just Hayek again – no one does have enough detailed and correct information at the centre to be able to even measure, let alone plan, the economy.

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Boganboy
Boganboy
1 year ago

You do remind me of the last Australian election, where the pollsters all predicted a Labor win. After the event, they claimed that the Liberal win was within the margin of error.

I did wonder why they didn’t just say before the event that the election was too close to call. But I suspect that, as they’d just silenced all contradictory opinions by calling them hate speech, they felt that the universal support in the media for their program reflected reality.

Spike
Spike
1 year ago

Is this another newspaper that can’t distinguish a statistic from its first derivative? Trump’s re-election is not threatened because employment is growing but by “only” 1%, not while his Green New Deal opponent is eager to foist a rate of -100% on miners, refiners, and maybe dairymen. (If the opponent is instead Biden, the election will not be contested on issues for obvious reasons.)

If there is something happening, though, it is businessmen with a hot new idea holding off on hiring to see if Trump slaps tariffs on the offshore participant.

Pat
Pat
1 year ago

May I suggest that the lower unemployment becomes, the harder it becomes to lower it further.
Since it is now reckoned to be as low as it has been since records began, further improvement will be difficult.
As to whether the American voter will take this for granted this year or express gratitude I don’t know.
Keep it up long enough and it will be taken for granted though.

Spike
Spike
1 year ago
Reply to  Pat

You’re right on two counts. Unemployment rates above 3.5% have been called “full employment” as most of those observed not at work are “between jobs,” moving house to support a spouse’s job and not yet found one of their own, and so on. Also, there is the “What have you done for me lately?” effect. Once we get three years away from Trump’s signature tax cut (though he does a lot of promotion), our attention will turn to stuff that’s news. Lies will also figure into it; Liz Warren has been sobbing that “the middle class is getting hammered!” all… Read more »

Phoenix44
Phoenix44
1 year ago
Reply to  Pat

In which case the focus should be on real wages, which should be rising.

Pat
Pat
1 year ago
Reply to  Phoenix44

And are. 4.5% pa for the poorest 25%, 2.9%pa for the richest 25%.
If I were Trump I’d get the house Republicans to introduce a bill raising whatever they call the tax free allowance. Either the Dems go along and it’s a straight win for Trump and the Republicans, or the Dems block it and appear mean.

Spike
Spike
1 year ago
Reply to  Pat

It’s the “zero bracket” (0%). The famous Trump tax cut was almost entirely on business taxes; for individual and investor taxes, it just shuffled the deck chairs. Moreover, the individual cuts auto-repeal in 3 more years (to stay below thresholds, given the revenue predictions, so as not to need opposition support). So yes, an individual tax cut (Kudlow calls it “tax cut 2.0”) is a winning election-year gambit.

Michael van der Riet
Michael van der Riet
1 year ago

When there is full employment, where do the extra employees come from? Apart from Mexico I mean and then they don’t appear on any payroll stats.

Spike
Spike
1 year ago

They come off the welfare rolls. In addition, some basement-dwellers set aside Fortnite and come out of the basement. Some jobs go unfilled until the salary is raised, at which point they pull people away from less-valuable roles, and even out of retirement.

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