From a national perspective, figuring out the status of the current job market has not been a walk in the park. Large data revisions, conflicting statistics, and considerable regional variation have made it quite a challenge to figure out the dynamics of today’s labor market.
The biggest challenge stems from a large data revision by the Bureau of Labor Statistics (BLS). When they first reported the national figures for August’s net job growth from their payroll survey, the number was downright depressing: -4,000, the first negative report in four years.
But a month later, they revised that number up by 93,000 (!) for a net gain of 89,000 in August, followed by a gain of 110,000 in September.
Clearly, any survey, even a large one like the BLS payroll survey from which these numbers derive, will have monthly blips. That’s why I like to take a three-month average of the job changes to better tease out the underlying signal. The problem is that due to these unusually large revisions in September, this method showed job growth at an average of about 45,000 over the prior three months. In October, the revised data (and the additional month) raised the three month average to 97,000, a much healthier rate of job growth.
Bottom line is…well, there are two bottom lines (hey, I’m an economist—I’m allowed to invoke the ‘on-the-one-hand’ method of discourse): first, the job market is healthier than we thought. I plumbed the underlying data a bit and I think the revised numbers are the right ones, i.e., I doubt these latest results will get revised away.
Second, even the improved rate of job growth is probably too slow to prevent the unemployment rate from rising. It’s still quite low at the national level, at 4.7%. But that’s up from 4.4% last March and the highest rate since August 2006.
Of course, like politics, from the perspective of the firm, all job markets are local. Michigan’s unemployment rate has been at recessionary levels (7.4% in August), while that of my state (VA) is 3.1%–all that gov’t deficit spending spins off some jobs, you know.
But my sense is that slower growth in the overall economy, related in large part to the housing bust, the credit crunch, and the resulting loss of economic stimulus from these developments, is bleeding into the job market. At times like this, it’s useful to go back to first principles: demand for labor is derived demand, derived from employers and producers views of where things are and where they’re headed. Again, there’s lots of variation around the country, but it looks to me like when it comes to labor market conditions, they’re tighter than I thought they were, but looser than they’ve been.
How’s it look to you?
Jared Bernstein is a member of the Workforce Institute Board of Advisors and author of All Together Now: Common Sense for a Fair Economy.