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Losses Are Actually Gains, And Other Weird Facts From The Jobs Report

What's today's big jobs report say?

The U.S. economy lost 2.8 million jobs jobs in January.

What?!

Don't panic. The U.S. economy loses millions of jobs every January, in good times and bad, largely because tons of seasonal holiday jobs always wind down after Christmas.

So if you set aside the normal, seasonal stuff, how is the job market doing?

The wonks who write the jobs report can answer that! They look at the typical, seasonal things that happen every year, do some math, and come up with a seasonally adjusted number. This is the number that gets widely reported in the news. So:

The U.S. economy added 157,000 jobs last month, after accounting for normal seasonal fluctuations. That's not great, but it's not bad.

OK!

Of course, the U.S. probably didn't add exactly 157,000 jobs (after accounting for seasonal factors). The truth is, we don't know exactly how many jobs the U.S. added. The jobs number is based on a survey of businesses that employ over 40 million workers, but that still leaves about 90 million workers who aren't captured in the survey.

Where are you going with this?

There's a fair bit of uncertainty about what the true jobs number is. In fact, the BLS quantifies the uncertainty. So we can make this bold statement about what the jobs report really says:

There is a 90 percent chance that the U.S. economy added somewhere between 65,000 and 249,000 jobs in January, after adjusting for seasonal fluctuations. There is a 10 percent chance that the U.S. actually added fewer than 65,000 jobs or more than 249,000 jobs during the month.

(It's worth noting that if the headline number in the report were 65,000, everybody would be saying it was disastrous; if it were 249,000 everybody would be saying it was fantastic.)

I'm afraid to even ask about the unemployment rate.

The unemployment rate is based on a separate survey — a survey of households, rather than businesses — that has its own measure of uncertainty. So:

There's a 90 percent chance that the unemployment rate is between 7.7 percent and 8.1 percent. There's a 10 percent chance that it's either lower than 7.7 percent or higher than 8.1 percent.

Is this a very long way of telling me to ignore the jobs report?

No! The jobs report is one of the best ways to figure out what's going on in the economy.

You're killing me.

The trick is to focus on the long-term trends, and not pay too much attention to any one number.

For one thing, the random fluctuations tend to cancel out from one month to the next, so when you look at the pattern over a few months you start to see what's really happening.

On top of that, the numbers get more reliable over time, as they are revised based on more complete data. Just today, the government released a big revision for last year. It turns out, the economy added about 300,000 more jobs last year than initially reported.

So the jobs numbers I read in the news every month last year were basically wrong?

Exactly! The typical monthly number was off by about 25 percent!

Whatever.

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