Friday, February 03, 2017

Jobs day

I'll offer up a bit of analysis that I've yet to hear anywhere re: the 227k jobs created in January.  A large portion of the "jobs" created in the report are "modeled jobs" based on samples.  Basically, they are a creation of someone working on an excel spreadsheet. 

Included in those models are seasonal adjustments which do things like add more jobs in the winter months even though the jobs don't exist because you want to smooth out the overall growth.

So while the real numbers might look like this:
Jan:     50
March: 75
June:     100
Sept:      80

When you multiply the data by your seasonal adjustments

Jan =     50 x 2      =    100
March =75 x 1.35 =    101.5
June =   100 x 1.03 =   103
Sept =    80 x 1.3 =      104

Ah, isn't that beautiful? Again, these aren't real numbers but they show the effect of seasonal smoothing. So, the seasonal factors have been built over many years where we have observed the impact on job growth change with the seasons.  However, we just had one of the warmest January's in 50 years and very little disruption to travel due to weather.  This probably made our January jobs data look a lot more like a March or April jobs number.  However, when you apply the January seasonal factor you get - boom!!! 227,000 jobs.  If and when we have numerous storms in a month, the jobs data is impacted and the first line out of everyone's mouth is "Well, the weather impacted the report...".  The truth is the weather can have a positive impact as well, but no one ever seems to complain about that.

I expect you'll see that number revised in the coming months but no one will notice if and when the revised numbers are released.

Cheers!

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