With the help of an ample amount of P.E.E., America sprouted a healthy 217,000 new jobs in May.
Are we seeing green shoots again, or are these springtime statistics setting us up for another disappointment?
First, the good news.
May was the second straight month in which Performance Enhancing Estimates (P.E.E is the acronym I’ve coined for this phenomenon) helped the job market record a statistically significant number of new jobs.
In Tuesday’s column, I explained why I thought upbeat government assumptions would deliver strong job gains for May, even though the economy contracted in the first three months of 2014 and may not be doing a whole lot better in the second quarter.
The 217,000 gain last month was about what Wall Street expected. So the stock market took the not-surprising announcement in stride and rallied further into record territory.
But May’s strong results also created the first four-month stretch of 200,000-plus jobs being created in more than 14 years.
Despite the robust job-creation period, it doesn’t look like it coaxed any unemployed rear ends off the sofa to start looking for work.
The May unemployment rate stayed at 6.3 percent — mainly because the size of the work force stayed the same.
Even though it seems counter-intuitive, the unemployment rate declines when people quit looking for work, as happened in abundance in April, and rises when folks get optimistic and begin job hunting again.
So why didn’t employment seekers get more optimistic in May if — as the Labor Department maintains — job growth was good?
P.E.E. can explain that. The job market could be repeating the same mirage we’ve seen the past few years.
As I’ve explained so often it makes my editors run for cover, the months of April, May and June are helped by very optimistic assumptions at Labor concerning the number of new companies that are being “born.”
For May, Labor’s guesswork added a seasonally adjusted 40,000 jobs to the 217,000 total. That’s about 20 percent of the total new jobs in May.
So a good chunk of the 217,000 new jobs is a total guess by Labor.
Lance Roberts, head of STA Wealth Management, says that another 20,000 estimated (not real) jobs were added to the total for other seasonal adjustments.
Seasonal adjustments are a legitimate way to smooth out weather factors. But this May’s adjustment, Roberts says, was about 20,000 jobs more than normal.
“As we have continued to see over the last couple of years, (May’s) employment shows we are in a muddle-through economy with hiring no faster than the rate of population growth,” Roberts told me.
Worse, even though the nation now has as many jobs as it did before the so-called Great Recession, many of the new positions are lower-paying jobs.
Lower wage health-care jobs, for instance, are growing more quickly than others, thanks — likely — to ObamaCare, which has turned into a sort of unintentional Works Progress Administration that FDR founded during the 1930s Depression.
We’ll know what the job market is really doing this summer when the economic statistics come off their performance enhancing guesses and will have to stand on their own.