The November jobs report is scheduled to come out at 8:30 Friday morning, and will surely be accompanied by the usual hyperactive analysis, rapid-fire tweeting, and general sense of eager anticipation.
But the numbers themselves are likely to be a muddy mess, offering little clarity on the true state of the U.S. job market on the eve of the fiscal cliff. The biggest reason is Hurricane Sandy, which struck the Northeast at the tail end of October and has made most economic data in the last couple of weeks hard to parse. But the confusion goes deeper.
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.
The consensus of analysts surveyed by Bloomberg News was that 86,000 jobs were added nationwide last month, down from 171,000 in October. The forecasters expect the unemployment rate to be unchanged at 7.9 percent.
But with all those layers of uncertainty, it’s hard to imagine any number that would count as a total surprise. BNP Paribas, for example, expects payroll gains of only 25,000 positions, which would be the weakest in more than two years. Economist Julia Coronado notes that her week forecast is “entirely attributable to disruptions associated with Hurricane Sandy,” which could bode well for the longer-term, as the impacts of the storm on the job market seem to be reversing quickly.
The intuition is simple: With power out and transportation networks blocked in coastal areas stretching from Maryland to Connecticut, many factories and other businesses had to shut down temporarily. Their workers were therefore jobless, if only for a short time (a time that coincided with the Labor Department’s survey period for the November jobs report). The number of people filing new claims for unemployment insurance benefits spiked to 451,000 the first week of November, up from an average of 372,000 the previous four weeks. But the number has fallen almost as quickly; the Labor Department said Thursday that only 370,000 people filed new jobless claims last week.
It will be possible to filter out the effects of the storm and glean what happened in the economy more broadly last month, but not until December 21. That is when the Labor Department releases state jobs numbers; a data set that is often overlooked, it will be parsed to filter out the effect of job losses in New Jersey, New York, and other affected places.
So how can one parse from Friday’s report what is really going on in the economy? 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.
In October, those non-storm-sensitive sectors added a combined 68,000 jobs. For early evidence on whether the pace of economic recovery sped up or slowed down on Friday, look at what happened to that number in November.