Jekyll-and-Hyde U.S. jobs report not as ugly because it seems

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Sometimes the U.S. employment report is like Dr. Jekyll and Mr. Hyde. One part of the report may look great, but another part is ugly.

The November job report also has a split personality, but Wall Street gives the good doctor more credibility.

Let’s look at Mr. Hyde first. The ugly part of the report was the tepid job growth of 210,000 – the smallest in 11 months. Wall Street had expected an increase more than twice as high.

The weak headline – from a company survey – suggests that the worst labor shortage in decades is holding back the economy.

Companies simply cannot find enough workers to produce all of the goods and services that customers demand.

But maybe it’s not as bad as it looks. Let us now turn to the handsome Dr. Jekyll too.

Another piece of November’s job report showed that a whopping 1.13 million people found work last month, based on a separate survey of households. That’s good news.

The household survey also found that nearly 600,000 people are entering the labor market and unemployment is falling to a pandemic low of 4.2%.

“This report is a story of two surveys,” said Nick Bunker, director of economic research at Indeed Hiring Lab.

What to believe It’s getting tricky here.

The increase in the number of employees by 210,000 can be traced back to a regular survey of companies and authorities, which is considered to be very reliable. The survey queries nearly 700,000 jobs every month to determine how many people are employed.

Another household survey is used to determine the unemployment rate. The same survey also found that more than 1 million people found work in November.

However, since the household survey only surveys 60,000 households a month, it is not nearly as accurate. The margin of error is about five times greater than that of the salary survey.

Because of this, the number of payrolls – 210,000 in this case – gets the most attention each month.

That is not the case with the November report. Most economists believe that the household survey provides a more accurate story about the labor market. They believe that more people will enter the labor market and more people will find work.

One possibility, say some economists, is that the government’s seasonal adjustments that have resulted in 210,000 employees are out of whack. The raw data showed that the attitude was much stronger.

The origin of the problem could originally be at the beginning of the pandemic, when the Department of Labor changed the adjustment of wages to seasonal employment patterns.

Now, the revised method could actually lead to more erratic results for payroll than for the household survey. The pay slips have been all over the map since last summer.

“In the past, the household survey has been more volatile and therefore less reliable,” said Jefferies LLC’s chief economist Aneta Markowska.

“But if people really switch from employment to gig work – as many did during the pandemic – then the household survey might actually paint a more accurate picture of the job market because it covers all workers.”

How will we know for sure? Stay tuned. The next few months’ job reports should give a clearer answer.

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