Is the Recovery Dying?

The Bureau of Labor Statistics reported on Friday that the number of Americans with jobs only increased by 88,000 in March on a seasonally adjusted basis. That’s one of the weakest months in the last two years. Although it’s clearly a disappointment, I would caution against reading too much into the latest number.

Nonfarm payroll employment is one of the most important and widely followed indicators. Notwithstanding, there’s a lot of noise in the initial estimates. The graph below plots the job growth numbers as they were initially reported (in yellow), what they were reported by the BLS to be one year later (fuchsia), and what the BLS is claiming today was the appropriate figure for that month’s job growth. The average absolute change between the first two numbers is 52,000. In other words, it would be quite typical if one year from now the BLS tells us that March job growth was really 130,000, or was only 36,000.

Seasonally adjusted employment growth for each month, Jan 2005 – Mar 2013, as reported at the time (yellow), one year later (fuchsia), and as currently reported (black), in thousands of workers. Data source: ALFRED.

For example, last month the BLS had estimated that nonfarm payrolls grew by 119,000 in January and 236,000 in February. On Friday they revised these estimates to 148,000 for January and 268,000 for February. And even once all the revisions are finished, the number is still only an estimate, from which the true value could differ significantly.

Fortunately, there’s a lot of persistence in the underlying true employment situation, and a little better information comes from averaging the last 3 months, as shown in the figure below. The BLS currently estimates that the U.S. added 168,000 jobs each month in the first quarter of 2013. That’s down from the 209,000 for 2012:Q4 but better than Q3 or Q2 last year. It’s a little better than the average of 148,000 that we saw over 2010-2012.

Black line: seasonally adjusted employment growth for each month, Jan 2010 – Mar 2013, as currently reported. Purple bars: quarterly averages. Data source: FRED.

I think that the right take-away from the latest report is that U.S. economic growth is continuing at about the pace it has been– sluggish growth and high unemployment continue to be with us.

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