sceptics love to make fun of how seriously the world takes the BLS’s monthly jobs report.
Sure, it’s arguably the most important measure of economic health.
However, it’s also one of the more inaccurate stats we get.
“The monthly nonfarm payroll figures are revised at least seven times,” said Deutsche Bank economist Joe LaVorgna in a note to clients last month. “It happens twice in the two months immediately following the initial release and then once every year during the annual benchmark revision, which extends back five years. This means the final results often look very different from what was initially reported.”
Economists and traders are paying particularly close attention to today’s June jobs report as it could have a material impact on the direction of monetary policy.
But the June report is notorious for getting slammed by seasonality, which makes the seasonal adjustments almost unreliable.
“Historically, June nonfarm payrolls have tended to be weak, possibly reflecting the difficulty in seasonally adjusting the data for the entry of students and the exiting of teachers ahead of the summer recess,” said LaVorgna earlier this week. “In point of fact, the strongest reading we have seen in the initially reported change on June nonfarm payrolls going back to 2000 has been just +146k (June 2005).”
Calculated Risk’s Bill McBride points to the BLS’s own words on the matter:
[I]n the household survey, the large number of youth entering the labour force each June is likely to obscure any other changes that have taken place relative to May, making it difficult to determine if the level of economic activity has risen or declined. Similarly, in the establishment survey, payroll employment in education declines by about 20 per cent at the end of the spring term and later rises with the start of the fall term, obscuring the underlying employment trends in the industry. Because seasonal employment changes at the end and beginning of the school year can be estimated, the statistics can be adjusted to make underlying employment patterns more discernible.
So, we have an extremely important jobs report, that has a history of inaccuracy, on an extremely noisy month, on a day when we’ll probably see low trading volumes as Americans recover from their 4th of July hangovers.
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