Back to Zero

by Tom Bozzo

The unexpected drop in the unemployment rate for January made me more than usually curious about the household survey results, and things there actually look OK for a change. The flat unemployment rate between November and December ’09 was the less-than-virtuous result of declining labor force participation pacing the decline in employment. This month’s decline in the unemployment rate reflects increasing labor-force participation and employment-to-population ratios; unemployment levels and underemployment rates [1] are also down. The unemployment decline appears to be statistically significant based on the BLS’s (inexact) guidance on sampling variability in household survey estimates.

The headline employment figure, in contrast, is not a statistically (or qualitatively) significant result, hence the summary’s “essentially unchanged” language. The everlovin’ net birth-death model is subtracting more jobs this month than it did in January ’09 — -427,000 jobs vs. -356,000 a year ago — so if we’re actually at a turning point expect this adjustment to be a drag on measured employment. The mild upturn in manufacturing employment follows other strong data from that sector, and it’s also not unexpected to see temporary employment accounting for the measured service sector growth.

Brad DeLong has been scratching his head over seasonal adjustment to the unemployment claims series; I’m wondering about what’s showing up as a December employment dip. The not-seasonally-adjusted data usually features a small November-to-December drop. Last year’s -538,000 was less than in ’08 (around -1 million) but more than previous years. A December dip after a strong November doesn’t feel right, so go figure.

Calculated Risk and Spencer have graphs and much more discussion.

[1] I expect the last paragraph of the Times story to be revised later to reflect this.