The business press and the financial analysts and economists they consult continue to mostly blindly rely on the seasonally adjusted figures the government and other economic report generators hand them on a silver platter.
If these de facto stenographers had dug just a little deeper a month ago, they might have avoided the serious embarassment of predicting a level of seasonally adjusted March job growth that was only half of the quarter-million they confidently predicted.
To be clear, a refusal to let the full truth be known is also a part of the equation. Weak reported numbers in construction spending, durable goods, factory orders, retail sales and consumer spending began arriving around the first of the year, and kept on coming virtually without interruption after that. The business press has downplayed the relevance of these items in favor of trumpeting supposedly good jobs news and sentiment surveys not directly supported by hard numbers.
Beyond that, reporters who overemphasized the job market's alleged health allowed themselves to get lulled to sleep by how extraordinarily overstated the seasonally adjusted figure of 295,000 jobs added in February was compared to the underlying raw numbers.
It shouldn't have heppened. If they had looked at the raw numbers they would have seen that February was really not that impressive:
The 903,000 jobs actually added in February was less than both 2012 and 2013, and — if you buy the prevailing wisdom about last year, which the business press does — only better than 2014 because last year's weather was so bad. Yet somehow, the seasonally adjusted figure of 295,000 jobs added is only 19,000 lower than 2013, and almost 50,000 higher than 2012.
If we give the BLS seasonalizers the benefit of the doubt (not necessarily deserved), we're left with the problem that seasonal conversions only work when the relationships are consistent over the time period presented. Because of the job market's fits and starts since the recession officially ended, that hasn't been the case.
So February was already bad. But it got worse on Friday, and the degree of seasonal overstatement compared to the underlying reality increased:
The number of actual jobs added in February dropped by 71,000 (903K minus 832K), but the seasonally adjusted figure only dropped by 31,000 (295K minus 264K). At this point, you can make a case that regardless of how the government calculated it, February's revised performance was really more like a 100K-125K month.
Now throw in the awful March, and we see above that the combined February and March additions of 1.655 million are the lowest since 2010, when the economy finally started adding seasonally adjusted jobs after a two-year drought.
This underperformance could hardly come at a worse time. With the exception of the years affected by the recession, the five months of February through June have been the strongest consecutive months for actual net job additions every year since the turn of the century. The first two of those five months this year have been weak. Unlike in previous years, there has been a cascade of disappointing data in other areas. As seen below, employment really needs to grow by at least 4.4 million jobs during those five months this year to be even close to performing well:
Given the number of workers on the sidelines and the fact that full-time employment still hasn't returned to its pre-recession peak, I would argue that at least 5 million jobs really need to be added during February through June. That's pretty clearly not going to happen.
The whiplash we saw on Friday and Saturday as the business press absorbed the bad jobs news — exemplfied by the Associated Press's admission, after months of pretending otherwise, that "For months, the U.S. economy's strength has been flagging" — was completely avoidable if they had only chosen to examine and properly interpret the raw data. But they didn't.
Perhaps they never will. Until they do, their reporting will remain presumptively suspect.
Cross-posted at BizzyBlog.com.
