Strong Job Growth and Upward Revisions Contrast Sharply with Reported GDP Decrease
Wednesday’s data release from the Bureau of Economic Analysis surprised us with a reported decrease of 0.1 percent in GDP for Q4 2012. Now, just two days later, a report from the Bureau of Labor Statistics shows robust job growth throughout the last quarter and continuing into January. The two offer sharply contrasting indications of the strength of the economy in the last three months of the year.
The payroll jobs data from the survey of business establishments are subject to both monthly and annual revisions. Monthly revisions reflect the fact that when the numbers are first released, early in the following month, not all firms have submitted their payroll information. As more firms report in, data for the previous month and the month before that are revised. In addition, the data are subject to an annual benchmarking process based on unemployment insurance records. The BLS releases data based on the new benchmarks each January, including revisions of monthly jobs figures for the entire previous year. The following chart shows both the previously reported and the revised data. For all of 2012, the economy added 2,170,000 nonfarm payroll jobs, 324,000 more than previously reported. The revised job gain for Q4 was 603,000. That was more than the quarterly average for the year and 150,000 higher than previously reported. In short, the payroll jobs numbers suggest that the economy was strengthening, not weakening, in the last quarter.
The BEA calculates the unemployment rate on the basis of a separate survey of households. The unemployment rate has changed little over the past four months, as the next chart shows. The civilian labor force, the number of employed workers, and the number of unemployed all increased slightly in January. Because the number of workers entering the job market increased a little faster than the number finding jobs, the unemployment rate ticked up from 7.8 percent in December to 7.9 percent in January, putting it back up to its October level. A broader measure of unemployment known as U-6, which includes discouraged and involuntary part-time workers, remained unchanged at 14.4 percent.
A further examination of the latest data reveals one other sign of strength in the labor market. The share of unemployed workers who have been out of work for 27 weeks or more fell a full percentage point to 38.1 percent. That is still far higher than in any other recent recession, but as the next chart shows, the trend is at least moving in the right direction.
Despite the positive news, the job market remains far from full recovery. The following spider chart shows six of the most important indicators from the January BLS report. It plots each of them on a scale from zero, representing that indicator’s worst month in the recent recession, to one hundred, representing its best month prior to the onset of the recession. (A hat-tip to David Altig of the Atlanta Fed’s Macroblog for the idea of displaying job-market data in this way. His January 10 post includes a more detailed spider chart that draws on several data sources; this one includes only data from the monthly BLS employment release.)
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