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Wednesday, September 19, 2012

Best August for Jobs since 1996?

Were August jobs numbers really that bad?

The jobs numbers for August 2012 compared to previous Augusts are actually pretty good!

August typically is not a good month for job growth, so it's informative to compare this August to prior Augusts.  

In total jobs:  
  • In seasonally adjusted numbers, this is the biggest increase in total jobs for the month of August (+96,000) since 2006.  
  • In "raw" unadjusted numbers, this month's increase of 252,000 jobs is the BEST unadjusted improvement in job numbers in August since 1996!  
  • And, again in raw unadjusted jobs numbers, this is the fifth best gain in  August since the beginning of the Reagan years.

Let's look at private jobs in August:
  • In seasonally adjusted numbers, this is the second best increase of the past six years.
  • But in unadjusted numbers, the increase in the number of private jobs in August is the best August since 2005, and the second best over the past 14 years.  

Hinky Seasonal Adjustments

Though I understand why we seasonally adjust jobs numbers, I don't completely understand the precise formulas that are used.  Therefore, I don't understand exactly why the seasonal adjustments this year were not as  good, relative to prior years, as they should have been considering the unadjusted numbers of jobs.

The chart above shows a fairly high blue bar marked "252" for the year 2012.  It is higher than any other blue bar going back to 1996.  Those are total unadjusted "real" jobs.  The red bar for the year 2012 doesn't stick out quite as much, but it is higher than all other red bars save one, going back to 1998.  Those red bars represent unadjusted "real" private sector jobs.  The green and black bars represent seasonally adjusted jobs.           

252,000 total new jobs in "raw" unadjusted numbers adjusted to 96,000 new jobs now, in August 2012.  However, in August 2005, 245,000 new jobs adjusted to 193,000 jobs!  Based on that kind of adjustment, we'd be celebrating 200,000 new jobs now and not lamenting only 96,000 jobs.  

Likewise, now, in August 2012, 166,000 "raw" new private sector jobs adjusted to 103,000 private sector jobs, but in August 2010, 159,000 "raw" private sector jobs adjusted to 128,000 private jobs.  In 2006,  154,000 "raw" private jobs adjusted to 145,000 private sector jobs. 

Why such differences in the adjustments of very similar raw numbers of jobs?  To be fair, some of the difference in adjustments is based on the mix of private and government sector jobs.  In August, increases in private sector jobs count more than increases in government jobs.  But we really did add 252,000 jobs in August, not 96,000.  And that was a good showing.

In any event, August 2011 (last year) was the "zero" month.  In early September, it appeared that we had not added ANY new jobs.  But now, with adjustments and corrections, it appears that we actually added 85,000 in August 2011.  At the end of this month, the CES numbers will be benchmarked to the County Employment Reports which are based on the unemployment tax records that employers must send to the feds.  These are generally more accurate than the CES sample survey, and, in a growing economy, they often result in more job growth than was originally projected.  So--- we will have to see what happens next week. 

To summarize:

  • August is usually a bad month for job growth.  
  • Compared to previous Augusts, this August was pretty decent for jobs.
  • It was the best August for jobs since 2006.
  • In terms of unadjusted jobs, it was the best August for jobs since 1996!
  • Seasonal adjustments seem to be off compared to seasonal adjustments of prior Augusts, which is one reason why the jobs numbers may appear lower than they really are.  


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