Friday's jobs report may not carry the same competitive weight it did before the election, but with the possibility that going off the fiscal cliff will damage the economy, it's still a much-anticipated event. Before you fire off your response tweet, Wonkblog's Neil Irwin explains why the top-line numbers won't tell the whole story:
Start with whatever any given jobs report tells us about the underlying state of the economy, namely whether hiring picked up or slowed down in the previous month. Adjust for the statistical randomness that can give misleading signals. Now add in the fact that around the holidays, the seasonal adjustment process looms particularly large and can create distortions; for example, Thanksgiving fell early this year, so retailers may have added temporary workers earlier than they usually do. Add in a looming austerity crisis of tax hikes and spending cuts scheduled to take effect Jan. 1; quite possibly, employers are holding back on hiring until a resolution is found, though with all the other things going on, it will be hard to separate that effect from everything else. And finally, account for a superstorm that shut down commerce in some of the nation’s most populous areas during the week of the jobs survey.
Irwin offers this advice for how to get something useful out of the noise:
One approach is simply to filter out the categories of employment that are most sensitive to disruption from the storm and holiday seasonal fluctuations, and focus on those that remain. Out goes manufacturing, construction, transportation and warehousing, wholesale, the retail industry, and leisure and hospitality. The categories that remain include mining and logging, information, financial activities, professional and business services, education and health care, other services, and government.