Friday’s jobs report was a bit of a disappointment. Employers added just 210,000 workers to their payrolls in November, well below expectations. The New York Times suggests the pre-holiday lull may be a sign “that companies are cautious about prospects for growth.” And maybe that’s the case. But I personally wouldn’t read too much into this round of numbers since there’s a decent chance that, two months from now, they’ll look a bit better.
The important thing to keep in mind about the headline jobs figure that journalists and investors obsess over on the first Friday of every month is that it’s really just a first draft, which gets revised as more data trickles in from employers. And ever since the coronavirus crisis began, those updates have been unusually large, presumably because the pandemic has mucked with the governments survey process a bit. This year, the Bureau of Labor Statistics has added 976,000 jobs to its tally through revisions, or 97,600 per month. By comparison, since 2003 revisions have added an extra 13,000 jobs per month. Through September, the last month with two full rounds of revisions, the Labor Department’s initial estimate has been off from its final figure by about 23 percent, compared to 19 percent in 2019.
The updates haven’t added a significant number of jobs every month: For April, they tacked on just 3,000, and in March, they subtracted 131,000. But in general, a good rule of thumb for now is that the jobs report tends to improve with age.
There are some other reasons not to put too much stock in this month’s underwhelming figure. First, the jobs report in general was just a bit strange—Wall Street guys variously described it to Bloomberg as “all over the place” and “one of the weirdest reports I have ever seen.” Much of the confusion had to do with a giant gap between the government’s two main sources of information on the labor market. The employer survey, which is used to track the number of new workers added to payrolls each month, showed just 210,000 new jobs. But the household survey, which polls individuals and is used to calculate numbers like the unemployment rate, showed employment increasing by more than 1.1 million. That might foreshadow some hefty upward revisions for the payroll numbers in the coming months. (Emphasis on might. At the risk of getting too in the weeds, there’s a separate dataset from the BLS that suggests the Household numbers have actually been trailing what you’d expect based on the payroll figures in recent months, and so this might just be some catchup growth).
One other potential factor may be seasonal adjustments the government makes to its data to smooth out the effects of things like temporary summer and holiday season hiring that would otherwise make the jobs data too choppy to easily interpret. As Upwork economist Adam Ozimek noted today, it’s conceivable that the massive swings in the job market due to COVID have caused the adjustment process to fritz out a bit. Moreover, if the seasonal adjustment factors are causing the government to underreport job growth before the holidays, they might cause it overreport it after, in which case things will even out a bit.
All of which is a lengthy way of saying: With the jobs report, you kind of have to take the long view right now. Everybody wants instant, accurate information about the economy, but interpreting the government’s numbers always requires some fuzzy guesswork. For the year, we’re still averaging more than 550,000 new jobs per month, and there isn’t much reason yet to think that number is about to massively change (unless, that is, Omicron ruins everything).