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On the Monthly Jobs Report

I don’t remember exactly when it happened. I think it was some time while I was in Afghanistan. Maybe having a regular piece of news from the states helped count down the months until I returned. Or maybe it was because each month, you have this little piece of hope and optimism begging for tangible evidence that the U.S. economy will, in fact, get better. Maybe it’s something a little wonkier than that and was just part of my growing appreciation for economics. Whatever the reason, sometime within the past 18 months, I’ve become obsessed with the monthly jobs reports.

It’s a little embarrassing, really. I have on at least two occasions declined the chance to stay out late on Thursday nights because I didn’t want to sleep through the Friday 9:00 am release of the numbers. This past semester, I was lucky enough to have one early Friday class that forced me to be awake, and then a clear day behind it so I got to devote plenty of time to jobs coverage. My normal routine is to start on Fox News. I know enough myself to be able to digest and interpret most of the numbers, but part of the fun of the monthly job report is watching all the spin, and nobody spins like Fox News. After getting a healthy (often infuriating) 30-45 minutes on Fox News, I’ll hop around from CNN to MSNBC and if I happen to be in a car that day at the right time, I of course tune into NPR (and yes, I know that radio is available outside of cars).

Having said all of that, the next part might come as a bit of a surprise coming from me: We have to calm down about the monthly jobs report. I guess this is mainly a media/political pundit problem. I’m sure telling casual readers of my blog to calm down about the jobs report may count as preaching to the choir, but I hope that this post might serve as a sort of viewers’ guide as far as how NOT to interpret the monthly jobs report… or at least its coverage.

The most important thing I have to say here is that each month is not an isolated event. Remember in December, January and February, when the monthly jobs reports were beating expectations and the Obama administration and many Democrats greeted each new report with an accompanying statement that this was proof that the economy was on the right track? And here we are this week after the job growth numbers have failed to meet expectations for 2-3 consecutive months and now Mitt Romney has repeatedly stated that this is clearly proof that Obama’s policies have failed. Of course, if June’s numbers prove that Obama’s policies have failed, what did February’s numbers tell us?

You see, one month cannot “prove” anything. And if anyone uses one month as “proof,” they set themselves up to be proved wrong a month or two later when the report goes a different direction.  When the Obama administration claimed that a monthly jobs report, on its own, could prove their point, they left themselves open to the counter attack when the bad news came… and the funny thing is that we knew it was coming.

When seeking out the most objective economists’ opinions, it becomes a lot easier to keep things in perspective. When those higher-than-expected numbers were flowing at the beginning of 2012, many economists theorized that the unseasonably warm weather was causing some hiring to “borrow” from the Spring by hiring workers earlier than they normally would. Those economists predicted lower-than-expected numbers for Spring, just as we have been seeing.

Furthermore, you may have heard a lot of Republicans claiming that the unemployment number was dropping only because the labor force was shrinking (a claim that was often true for individual months, but is untrue when looking at the broader trend over the past 6-8 months). Because the labor force participation rate has been low coming out of the recession, many economists suggested that as the unemployment number fell, many people would see signs of improvement and resume their job search, thus pushing the unemployment number back up a little, something like what just happened in going from 8.1% to 8.2% this month.

Like I said, looking at the broader trend and the numbers through a long-term scope, we all should have known what kind of jobs reports to expect this Spring. When the unemployment rate unexpectedly fell from 8.5% to 8.3% in a single month, my first thought was, “That’s probably going to start to tick back up soon.” When new jobs were far outpacing expectations, I thought, “This won’t last.” The numbers told us to think that. Honest economists told us to think that.

But when each individual month is looked at in a vacuum and politicized to the maximum degree, a bad jobs report seems like the end of the world, and a good jobs report seems like cause for a national celebration. Clearly, neither is true. And I think that I would enjoy my little ritual on the first Friday of every month a lot more if the people covering the numbers were honest enough to admit that.

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