Contradiction: Strong Jobs Growth and Weak Economic Growth Predicitions

Update: Obviously I was wrong on the Fed rate hike prediction.  The Fed just raised rates on the strength of inflation data and despite weak economic growth. Reference: Fed raises rates for 3rd time in 15 months, hike forecast unchanged: http://www.usatoday.com/story/money/2017/03/15/federal-reserve-interest-rates-economy-janet-yellen-mortgages-credit-cards/99186568/

Original Post:

March 10th's stronger-than-expected number of jobs added, has many falsely believing that the economy is strong.  As of this writing, the Atlanta Federal Reserve's GDPNow projection for economic growth in the first quarter sits at just 1.2% after a dramatic 3.4% projection at the end of January.

The biggest contributor to the strong February jobs number was warmer-than-normal weather and not the economy in general.  Warmer weather meant more construction projects in what would normally be a winter lull.  That is why we saw 58,000 construction jobs created in the month; the highest level in 10 years.  And, we shouldn't erroneously attribute the strong jobs report to some type of Trump-effect.  Further, the assumption that the Federal Reserve will raise interest rates solely on the jobs report and not on economic growth is probably wrong.

References:

Strong U.S. job growth, rising wages set stage for Fed rate hike: http://www.reuters.com/article/us-usa-economy-idUSKBN16H0KA?il=0

152,528,000: Record Number of Employed in February; Participation Rate Rises: http://www.cnsnews.com/news/article/susan-jones/152528000-record-number-employed-february-participation-rate-rises

Source of Graphic: https://www.frbatlanta.org/cqer/research/gdpnow.aspx?panel=1

The numbers are in on this freakishly warm February: http://www.cbsnews.com/news/february-2017-warm-temperatures-climate-change/

February's Jobs Report Only Deepens the Debate On How Jobs Data is Calculated

Early each month, the Bureau of Labor and Statistics releases its employment statistics for the prior month. In February, the highlights of that report, as generally reported by the media, were that the economy added 295,000 jobs and the unemployment rate fell to 5.5%.

What most Americans don't know is that those two statistics come from two separate monthly surveys  and that a debate still rages as to whether or not which survey is more accurate at calculating jobs added to the economy.

In February, the 295,000 jobs added comes from something called the "Establishment Data" (Table B)  which is a result of surveying the employment activity of 190,000 supposedly representative businesses in the U.S.   And, from that 190,000 surveyed businesses, the hiring practices of the more than 27 million firms in the country are then estimated.  On the other hand, the "Household Data" (Table A) extrapolates employment data from nearly 50,000 phone calls to households across the country.  According to that survey, the number of unemployed fell by 274,000 but, at the same time, 178,000 left the workforce. So, net-net, the economy only actually added 96,000 jobs; leaving the labor participation rate at a 37-year low. 

For decades, the consensus has been that the Establishment Data is more accurate for counting job additions because it looks at job activity within the businesses themselves.  At the same time, the Household Data is the only real means to determine unemployment rates because it samples real people.  But, the problem with both assumptions is the low sampling rate.  Sampling 190,000 businesses of the 27 million firms in this country is a representative sampling rate of about 7 tenths of one percent.  Sampling 50,000 households (assuming each household is equal to 2.1 persons on average) means that out of a population of 320 million, the sample rate is less than 3 one-hundreds of a percent.  Either way, there is certainly a lot of wiggle room to be wrong on any numbers being collected.

The bottom line is that I, personally, wouldn't bet the bank on the accuracy of any employment numbers that we see from the federal government.  On the other hand, there have been numerous other reports that have not been as "glowing" as this last jobs report.  For that reason, I believe that the Household Data on jobs is closer to the truth with only 96,000 jobs created in February.  But, that is just my opinion. 

References:

February 2015 Employment Situation Report: http://www.bls.gov/news.release/empsit.nr0.htm

Establishment vs. Household Survey—The Debate Continues: http://research.rerc.com/blog/establishment-vs-household-survey-the-debate-continues

Quick Facts From the U.S. Census: http://quickfacts.census.gov/qfd/states/00000.html

Soft U.S. data hints at near-term hiccup in economic growth: http://www.reuters.com/article/2015/03/05/us-usa-economy-unemployment-idUSKBN0M11IA20150305

U.S. Economic Data Not Meeting Expectations: http://www.wallstreetsectorselector.com/investment-articles/editors-desk/2015/03/u-s-economic-data-not-meeting-expectations/ 

US jobless claims rise; Q4 productivity revised down: http://www.cnbc.com/id/102476643

Weekly Economic Calendars: http://www.briefing.com/investor/calendars/

Great Jobs Report? Think Twice..

As with every jobs report since the recovery began, the issue has always been quantity rather than quality.  And, February's report is no different.

Sure.  295,000 jobs were created and the employment rate fell to 5.5%.  The far-left Politicus USA website points out that this is the 12th straight month of job creation over 200,000 and the lowest unemployment rate since 2008, plus all other kinds of statistics to cheer-lead the recovery under Obama.  But, one sorry fact remains:  Americans aren't getting better-paying jobs.

In February, the average hourly wage for all jobs in the U.S. only rose 3 cents or about $1.04 per week for four weeks. Annualized that's just $12.48.  How would you spend your $12.48?

The simple fact is that, under President Obama, our economy continues to create lack-luster, low paying jobs.  In fact, of those 295,000 created, Zero Hedge has identified that 152,000 (more than half) were low paying with the most gains (62,000) in the leisure and hospitality industries. Obviously, we're real good at creating jobs for waitresses, bartenders, and hotel maids.

References:

Politicus USA: Fox News Ignores Latest Jobs Report Showing Lowest Unemployment Rate In Seven Years: http://www.politicususa.com/2015/03/06/fox-news-ignores-latest-jobs-report-shows-lowest-unemployment-rate-years.html

Recovery Has Created Far More Low-Wage Jobs Than Better-Paid Ones: http://www.nytimes.com/2014/04/28/business/economy/recovery-has-created-far-more-low-wage-jobs-than-better-paid-ones.html

February 2015: Employment Situation Report (Page 3): http://www.bls.gov/news.release/pdf/empsit.pdf

A great jobs report for waitstaff and bartenders: http://www.cnbc.com/id/102484051

Why No Wage Increases: More Than Half Of Jobs Added In February Were Lowest-Quality, Lowest-Paying: http://www.zerohedge.com/news/2015-03-06/why-no-wage-increases-more-half-jobs-added-february-were-lowest-quality-lowest-payin

Rising Long-Term Unemployment: Proof Of Obama's Mishandling of the Economy

Recently, when the February jobs report was released, a number of Democrats and left-leaning media types jumped on the fact that the number of people who were out of work for more than 26 weeks had suddenly risen by 203,000.  Conveniently proving that the Democrats proposed extension of long-term unemployment benefits -- which are now stalled in the Republican-controlled House of Representatives -- is sorely needed.  Of course, some on the political right would say that the sudden jump in this number is another negative in Obama's handling of the economy and that the President's over-regulation is why we have so many long-term unemployed.  So to prove those people wrong, the far-left MSNBC was compelled to come to Obama's defense by showing long-term unemployment declining every year since he took office:

While that chart certainly shows what might look like a positive for Obama, the chart they aren't showing you is this one from the Huffington Post:

It clearly shows that we are at record high levels of long-term unemployment as a percentage of overall unemployment.  Of the 10.5 million unemployed in February, 37% are still long-term unemployed. That's more than double than the absolutely worst levels under any president since 1948. At the current rate of decline, we won't get back to pre-recession levels for decades to come. 

As far as extending unemployment benefits are concerned, we shouldn't be concerned.  What is being ignored in all of this debate over extending benefits is the fact that there are so many so-called safety nets in the system that people are better off without that unemployment check.  Without it, they get a welfare check, free Medicaid, housing assistance, subsidized child care, Earned Income Tax Credits, free Obama-phones, Food Stamps, and oh so many goodies that it just doesn't pay to have a job.  So, instead of Democrats telling the truth that they have made it better not to work, they, instead, want to use extended unemployment benefits as a wedge election issue to once again make Republicans look heartless.

References:

Long-term unemployment rises: http://www.msnbc.com/msnbc/jobs-report-february

February Unemployment Report: http://www.bls.gov/news.release/empsit.a.htm

Strong Jobs Report Could Mean Bad News For Unemployment Benefits: http://www.huffingtonpost.com/2013/12/06/unemployment-rate_n_4235332.html