Another crappy employment report!
Who’d have guessed it? Well, I did — in last Thursday’s column.
The Labor Department announced Friday that only 113,000 jobs were created in January. Wall Street — which predicts with its heart and not its head — was counting on anywhere from 170,000 to 185,000.
January’s growth was better than the miserable 74,000 jobs created in December, but not a lot better. The experts who predict this sort of stuff always blame external events for poor economic performance because they think it also gets them off the hook.
So January’s poor job growth will inevitably be blamed on all the snow that fell across the country. The only problem with that excuse is that it isn’t true.
Weather can be a factor in the so-called household survey that captures the unemployment rate (which dropped from 6.7 percent, to 6.6 percent) but it can have little effect on the survey of companies that adds up to the nation’s job count.
But there is something wrong with the January job figure — and, in fact, every January labor figure.
The first month of the year is almost never a good one for job growth — and it has nothing to do with a post-Christmas funk. Labor’s seasonal adjustments already take care of the hiring aberrations for the month.
January’s jobs numbers are usually bad because it’s the time of year when Labor reconciles its job creation estimates for the previous year — and the result usually is a subtraction of jobs because the government was too optimistic in its estimates.
In fact, Labor subtracted 307,000 jobs (before seasonal adjustments) last month during its reconciliation.
This happens almost every year in January. And because of these adjustments the experts on Wall Street are always wrong. (Maybe someone should dock their paycheck until they finally understand it.) By bad, I don’t mean they are always lower than the preceding month. They are, usually, lower than the average of the preceding three months.
In fact, January has been so lousy for so long that when they are not — like in January 2012 — it stands out.
In 2012, Labor added 311,000 January jobs during its reconciliation. That might have had something to do with the fact that 2012 was an election year.
Here’s the sad part of what I just told you.
The Federal Reserve must now make a decision on whether to continue tapering its disastrous Quantitative Easing program. It wants to kills this beast, but two bad employment reports in a row, along with lots of bad economic news, might just get the Fed to change its mind.
It would be sad if the Fed decided to stop its tapering — and move interest rates up from their zero percent target — based on January’s misunderstood employment report.
Especially since the downtick in the unemployment rate was affected by Congress ending long-term unemployment benefits to 1.7 million Americans.
If the Fed retreated from its taper, it would be as wrong as Wall Street has been in predicting job growth.