So for the third straight month not a single economist was in the ballpark of the jobs number released this morning. The magnitude of the "beat" this month will clearly get people excited but since I've been following these reports for close to 20 years I thought I'd share some insight that you might not get from the screaming commentators on CNBC.
Payrolls continue to be driven by voluntary and involuntary part-time work. This is important because of the way the BLS measures part-time work. If I work job 1 for 15 hrs on the weekend and job 2 for 20 hrs during the week and job 3 for 5 hrs in the evening, most people would say that almost equals a full time job (40 hours) but since the BLS doesn't weed out for duplicate job holders, this person working 3 part-time jobs counts as 3 JOBS for the government statisticians. It's hard to quantify the impact this is having on the jobs data, but my belief is that the impact is substantial. As employers look for ways to avoid added costs tied to full-time employees, the percentage of part-time employees has jumped substantially. However, given our old methods of collecting data I don't believe we're getting an accurate picture of the US jobs market.
We also have to contend with the issue of seasonal adjustments. Seasonal adjustments make sense as long as they are consistent with those used historically as they allow us to compare July jobs with those in January when the weather impacts are more substantial. However, this month the BLS seems to have pulled a completely random number out of the air. The adjustment factor accounted for the majority of this month's outperformance (non-adjusted payrolls added 85,000) and was much more significant than any recent adjustments. Again, it's too hard for most reporters to provide this level of detail in a 30 second piece on the jobs report but it should give us pause when we see a headline number that varies this much from the underlying data.
Ironically, this "good news" should mean an end of the perpetual panic mode for Central Banks like Federal Reserve and that should remove the bid underneath the stock market. However, in a very thin Friday session the computers are having their way with the markets and we've pushed through to new highs again (look for a note on how the oil markets were manipulated this week coming soon).
Thanks again for reading.