Economics 101: Trying to guess the unemployment number Updated! 7.5%

First came the report from ADP, with a hat tip to Patterico:

ADP reports 119K private job gains in April

By Paul Davidson, USA TODAY3:13 p.m. EDT May 1, 2013

Businesses added 119,000 jobs in March, payroll processor ADP said Wednesday, below economists’ expectations. Job growth picked up from the prior month but remained mired in a spring slowdown.

Economists’ consensus forecast was for private-sector gains of 150,000. A further sign of recent weak growth is that payroll gains in March were revised down to 131,000 from 158,000.

“Job growth appears to be slowing in response to very significant fiscal headwinds,” said Mark Zandi, chief economist at Moody’s Analytics, which helps compile the report for ADP. “Tax increases and government spending cuts are beginning to hit the job market,” says .

Economists estimate the Labor Department on Friday will report 148,000 job additions in March, including the private sector and federal, state and city governments, which have been cutting payrolls.

So, the unemployment numbers to be released at 0830 this morning should be dismal, right? Well, not so fast. From Karen, the Lonely Conservative:

324K Initial Jobless Claims

Initial jobless claims came in at 324,000, which is an considered great news in this new normal economy. Except that it’s not really all that great.

Applications for unemployment insurance payments fell 18,000 to 324,000 in the week ended April 27, the fewest since January 2008, Labor Department figures showed today in Washington. Economists forecast 345,000 claims, according to the median estimate in a Bloomberg survey. A Labor Department official said there was nothing unusual in the data.

Fewer firings show companies are confident their staff levels can adequately meet current demand. Even so, without a pickup in economic growth, the same companies may be reluctant to hire more workers in coming months.

“Employers are not necessarily shedding workers, but they are not necessarily enthusiastic about adding to payrolls either,” said Tom Simons, an economist at Jefferies LLC in New York, who projected claims would drop to 335,000. “It’s because of the low level of growth in the economy, and some caution about the future of fiscal policy.

Two different reports, and two different indicators, one which tells us that fewer jobs are being created than expected, and the other which indicates that fewer people are losing their jobs.

From THE WALL STREET JOURNAL:

It’s a Hard Job Predicting Payrolls Number

Carnival barkers have it easy. Aside from the fact that all they put at risk is a 50-cent plush toy against a $1 bet, guessing a reveler’s weight and age is simpler than it seems. Economists, on the other hand, are playing a mug’s game by predicting the most-watched U.S. economic release of the month, nonfarm payrolls.

The Wall Street consensus for March, for example, was off by more than 100,000—a huge miss. But, compared to the total number of jobs, it was a discrepancy of 0.07%. Throw in the fact that the figures are subject to revision and massaged by seasonal adjustments and birth-death models and influenced by the weather, and it’s a wonder professional seers don’t hurl their HP 12c calculators against the wall.

The Wall Street consensus for March, for example, was off by more than 100,000—a huge miss. But, compared to the total number of jobs, it was a discrepancy of 0.07%. Throw in the fact that the figures are subject to revision and massaged by seasonal adjustments and birth-death models and influenced by the weather, and it’s a wonder professional seers don’t hurl their HP 12c calculators against the wall.

The temptation may be especially strong on Friday morning, when April’s figures are released. Economists polled by Dow Jones Newswires see growth of 148,000 jobs. That is up sharply from March’s 88,000 figure but much lower than February’s stellar 268,000. The range between the top and bottom estimate is 90,000.

No wonder. Not only did last month’s figure spook Wall Street but Wednesday’s April private payrolls report from Automatic Data Processing ADP +0.85% lagged behind the consensus estimate by over 40,000 jobs. ADP indicated manufacturing employment was particularly weak, consistent with several disappointing regional manufacturing surveys. And payroll-withholding data analyzed by TrimTabs Investment Research suggest a very disappointing figure of 67,000 jobs for the government report.

More at the link.

Your Editor has said before that it’s somewhat foolish to base government policies on the projections of economists for the future when economists can’t even get right what has happened in the past. Will they get it right today? Maybe they will, and maybe they won’t.
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Update: From THE WALL STREET JOURNAL:

U.S. Economy Adds 165,000 to Payrolls

Big Revisions to Prior Two Months; Unemployment Rate Falls to 7.5%
By JEFFREY SPARSHOTT And ERIC MORATH

WASHINGTON—U.S. job growth picked up in April and the unemployment rate ticked down again, suggesting steady but still-measured economic growth.

Employers added 165,000 jobs last month, the Labor Department said Friday. The unemployment rate, obtained by a separate survey of U.S. households, fell one-tenth of a percentage point to 7.5% as more people found work. That was the lowest rate unemployment rate since December 2008.

Economists surveyed by Dow Jones Newswires had forecast that nonfarm payrolls would rise by 148,000 and the unemployment rate would hold steady at 7.6%.

In a positive sign, figures for the prior two months were revised up significantly—by a combined 114,000. The economy added 138,000 jobs in March, compared with the initially reported 88,000, and 332,000 jobs in February, compared with the previously reported 268,000. February’s revised number is the strongest since May 2010.

U.S. employers were adding more than 200,000 jobs a month through much of the winter, contributing to expectations of faster growth this year.

Instead, more recent data underscore the choppy growth that has marked the economy since the recession ended nearly four years ago. Overall, the fits and starts have averaged out to fairly tepid expansion of about 2% a year during the recovery.

More at the link.

5 Comments

  1. Oh wow (said in a droll downward voice). The Dow hit 15K today. Time to celebrate (not). It’s just BO’s overworked and burned out printers at the BEP throwing out money for banks to invest in the market. With the Dow at 15K, who feels richer, or is this 1929?

  2. The Fed keeps pumping 85 billion a month into the banks. Intrest rates are so low the banks refuse to lend money. Instead they pump the cash into the stock market for a better return. Liberals run around screaming how Obama has “lifted” the stock market. The rest of America stagnates. The libs say “we need more stimulus”. What is the 85 bil from the fed if not stimulus?

    This guy makes Jimmy Carter look like Adam Smith.

  3. Pingback: 324K Initial Jobless Claims | The Lonely Conservative

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