Don’t Throw Good News Out With the Bathwater

Headlines paint a dreary picture for job growth, but how do the numbers really reflect on the overall economy?


In a wave of positive economic signals for smoother sailing ahead, why are some still predicting the need for continued economic SOS? The answer is context, or lack of it, explains the Wall Street Journal. Without the proper statistical context, the slightest bad news — even amidst a bounty of good — can seem more dire than the reality.

In a piece called “Gyrating Numbers Are Misleading,” author Mark Whitehouse reports on the monthly increases in nonfarm payrolls. They have averaged more than 62,000 a month since September, with private firms adding approximately 107,000 jobs per month.

November's subsequent slowdown, at only 39,000 nonfarm employees hired, makes for a catching headline. But in a market of 130 million people currently on nonfarm U.S. payrolls, it really amounts to what Joseph Carson, director of global economic research at AllianceBerstein, calls “statistical noise.”

“People pay way too much attention to the initial headline number, because it’s so politically sensitive,” he says.

Discouraging reports of retailers cutting 28,000 jobs in November hinges on idiosyncratic seasonal adjustment by the Labor Department, the article reports. Without taking into account this adjustment, retailers added roughly 300,000 jobs this month.

And even the 0.2% rise in unemployment numbers to 9.8% in November is not all bad news considering the context behind it. Federal Reserve Chairman Ben Bernanke has long advised “the unemployment rate could rise even as the economy creates jobs,” when improving outlooks prod once-discouraged job seekers to renew their efforts.  

Retail and auto sales are posting solid, steady November growth, and many other industries are reporting encouraging trends. The Institute for Supply Management's monthly survey reported an employment reading of 52.7 for November, “the highest since October 2007 and an indication that service employment is finally picking up,” according to the NY Times. The economy might not be growing fast enough to outpace population growth and fully bring down unemployment yet ... but evidence is mounting that the larger economic turnaround necessary to bring unemployment down in the future is well underway.