Why February's Jobs Report Should Be Taken With 'A Big Grain Of Salt': Steve Forbes

The jobs report for February comes out. Take it with a big grain of salt. Hello, I'm Steve Forbes and this is What's Ahead, where you get the insights you need to better navigate these turbulent times. We'll release it for a variety of reasons, most particularly the disruptions of COVID. The adjustments routinely made to these statistics are particularly unreliable. Most people don't know that the headline numbers from the Labor Department's Bureau of Labor Statistics, the BLS, jobs created or lost and the unemployment rate, are seasonally adjusted. That is, they are changed to reflect normal seasonal patterns of hiring and firing.

For example, the BLS shocked observers when it reported that 517,000 jobs were created in January. President Biden quickly boasted that it showed how great he was handling the economy. Actually, 2.5 million jobs were lost. That's right, lost in January. By the BLS's reckoning, the jobs loss should have been 3 million. Usually there's considerable hiring during the holiday season and considerable firings in January.

As economist Alan Reynolds quipped, quote, in the 60s, when I managed the main floor of a JC penny store, I tried to reassure it laid off Christmas employees in January that, technically speaking, they were still employed on a seasonally adjusted basis, end quote. There's a seasonal surge of hiring in the summer. When kids go back to school, unemployment numbers take a hit. The BLS tries to quote, smooth the data series out, allowing data used to see changes and trends more readily, end quote. What makes those surprising January numbers so questionable is both that the pandemic lockdown has knocked customary patterns into a cocked hat and that numerous other surveys and economic reports show an economy that is heading into trouble. For instance, sectors of the economy are affected unevenly. Leisure and hospitality were severely whacked during the COVID crisis while high tech substantially increased payrolls.

And consumer debt is rising as incomes fail to keep up with rising prices. The number of people working today is about 2.6 million less than before COVID struck. The labor market's seeming usual tightness may also be distorting BLS's usual models for seasonally adjusting the data. The problem numerous employers have been experiencing in both hiring and keeping employees is probably why many may have been reluctant to let people go after the holidays. They can't be sure they can easily hire on the spring. Thus, the seasonally adjusted monthly jobs reports may be unintentionally distorted for several months.

That's why it's best for the foreseeable future to examine jobs data that is not seasonally adjusted. By the way, the BLS is facing something pollsters have been grappling with for a long time. Response rates for surveys have been falling. How that affects the quality of numbers, if at all, has yet to be determined. I'm Steve Forbes. Thanks for listening. Do send in your comments and suggestions.

I look forward to being with you soon again.

employment, economy, workers