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Friday, March 10, 2017

The Daily Combover - March 10, 2017

Every first Friday of the month, the Bureau of Labor Statistics (BLS) releases their latest report on the "Employment Situation."  This is part of their duties of disseminating information about economic performance, specifically relating to labor.  Their monthly series also includes updates on inflation, productivity, exports/imports, and several other measures of economic health and performance.  Between the BLS and BEA (Bureau of Economic Analysis) you can essentially learn about 90% of what's going on in the economy. The other 10% comes from various other agencies like CMS for health data, USDA for agricultural data, and FRED for Federal Reserve data.

Side Note: FRED actually pools all of the other sources of data as well so it makes a great one-stop shop for economic data.

With so much data out there, politicians and the media really have no excuse for getting anything wrong about our economic performance.  But, as always, the truth doesn't seem to matter much to the Fontange Fuhrer.

Yesterday he posted the first two based on flawed ADP findings and then followed it up with a retweet of Drudge fawning over the official BLS numbers. And I don't disagree with Matt Drudge's analysis: the numbers are solid AGAIN. But the February numbers often are very strong. In 2015, we had a net increase of 238K jobs in February, in 2016 we had a 237K increase. Plus this past January, the increase was 238K. So Trump's job numbers in his first month in office were pretty much in line with  the rest of the Obama Recovery.

Since we had another news day focused primarily on the AHCA, I figured now would be as good a time as any to get wonky.  So let's dig into how the government measures unemployment because it seems like people all over the political spectrum are a little confused.

First of all, the government surveys 60,000 households and another 60,000 employers with a series of questions including some about employment.  Unemployment rate numbers come from the household survey while job growth numbers come from the employer survey.  While the surveys are just samples, they are statistically at least 90% accurate.

Unemployment is defined as having worked fewer than 1 hour over the past 14 days AND having begun the process of looking for a new job.

However, certain populations are exempt: children, students, retirees, and prisoners.  This raw form of unemployment appears on the third line of the BLS report and has been nicknamed U3. Currently U3 is at 4.7% which is out official unemployment rate.

Other measures that factor in things like involuntary part-time unemployment and withdrawals from the labot force.  One of the more common versions of these is found on line 6 and has been dubbed U6. U6 will always be higher than U3 because it is far more sensitive to part-time employment.

Job growth is defined as the net number of additional jobs reported by employers in their survey.  Over the last 3 months, we have averaged an increase of 209K jobs per month.

So when you hear this, know that they have no idea what they are talking about, short of how to play politics:

Have a great weekend.

Catch you on the flip side.

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