Blog : Job Gains Are For Real

by Ed Zwirn on November 9th, 2013

Is the latest jobs report a quirk?

At first glance, the 204,000 new jobs added in October - more than twice the consensus forecast - would seem to be too good to trust. After all, half of October saw the furlough of hundreds of thousands of federal workers, and that should obviously prove to be a drag on the economy, impacting not only the government jobs outlook but also spinning out into the private sector as well.

And the furlough did have an impact, with the Bureau of Labor Statistics Friday morning jobs release reporting an increase of 448,000 workers on temporary layoff during October.  Not surprisingly, federal government employment was down by 12,000 in October, and was reported down 94,000 over the past 12 months. State and local government employment, on the other hand, saw a net gain of 4,000 jobs.

The private sector is making up for the drag created by federal cutbacks, with 212,000 new jobs being filled outside the government. Nearly half of this total, or 97,000 jobs, occurred in the traditionally lower paying leisure and hospitality and retail trade sectors.

Tempting as it may be to characterize these new jobs as low paying and dead end, as many of them undoubtedly are, the average employed worker has fared relatively well over the past year, with average hourly earnings reported up by 52 cents over the past year, or 2.2%, more than keeping up with inflation.

It is also important to point out that, as the latest revisions to recent jobs reports show, the October report may simply be a reversion to the mean. As reported Friday morning, total nonfarm payroll employment was up 238,000 in August, up from the 193,000 last estimated, and September job gains  are now pegged at 163,000, up from 148,000, meaning that the job gains for those two months combined were 60,000 higher than previously reported.

Crunching the numbers, monthly jobs growth over the past year has averaged 190,000. While this is by no means a stellar figure, it puts the October report into perspective as less of an anomaly than might appear at first glance.

On the other hand, this penny stock blog has given amply testimony to how both the volatility and frequent revisions of the jobs numbers can be used to show just how unreliable the jobs report can be as an indicator, at least when viewed from a short-term perspective. Many economists, particularly after having underestimated the October jobs growth figure, are already telling investors to wait for the November report, due out Dec. 6, for a "true" picture of the labor market.