The Job Market Data and the Fed

February 6, 2013

The bigger test for the job market will come soon enough.
-Scott Brown, chief economist, Raymond James

Nonfarm payrolls fell by 2.8 million in January – before seasonal adjustment, that is. Adjusted, payrolls advanced 157,000, about as expected. However, annual benchmark revisions showed a more rapid pace of job growth over the last two years – a pace at odds with the Household Survey data. How might the Fed view the range of job market data?

Each year, the Bureau of Labor Statistics benchmarks the Establishment Survey data to payroll tax receipts. In September, the BLS estimated that this year’s revision would add 386,000 to the March 2012 level of payrolls (prior to seasonal adjustment). Instead, the revision was +424,000 (or +0.3%, well within the usual range for these revisions). The details showed faster growth in private-sector jobs and somewhat larger declines in government jobs (mostly state and local). As it stands now, the economy averaged a gain of 181,000 jobs per month in 2012, vs. 175,000 per month in 2011, but to be consistent with the growth in the working-age population, we need about 120,000 per month. The unemployment rate should be falling.

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