Demystifying the Jobs Report

by | 17 October 2014

Given the noise following every economic data release these days, it’s easy to think that either the sky is falling or everything is coming up roses based on a single data point. So when the disappointing August U.S. employment data came out last month, many expressed concern over a possible change in the largely positive economic story so far this year.

Rather than relying on a single stat to determine the direction of the economy—particularly one like the employment figure that is revised multiple times and based on a small sample size—we recommend looking at the trend in the data instead. A weak monthly number can occur for a number of reasons, ranging from factors related to the process that is used to adjust for the data for seasonal effects, to an employee walkout at a large New England supermarket chain, which was one of the reasons for the poor August data. The trend in the data across multiple months better shows the economy’s trajectory. Also, the initial Bureau of Labor Statistics (BLS) employment stats have undercounted job creation nearly every month this year—underscoring the importance of not putting too much stock in the initial number. The September release was no exception: The July and August numbers were revised upward by 69,000 jobs.

So what else does the employment data released thus far in 2014 tell us? Well, for one, the U.S. economy is on pace in 2014 to add the most jobs in 15 years. The 2.04 million jobs added during the first nine months were the most since the dot-com boom in 1999, when 2.19 million jobs were added through the first three quarters. Add this to the 4.6 percent surge in GDP in Q2 2014 and multiple other recent positive indicators, and the economic picture is the brightest it’s been during the current recovery.

Also, recent months’ data show how much the economic recovery has broadened—a positive sign for the sustainability of the recovery and improvements in real estate fundamentals in a larger number of markets across the U.S. Nearly every employment sector has added jobs in recent months—even government, a laggard in the current recovery. Markets from Phoenix to Indianapolis to Miami are adding jobs at a faster rate, and the impact on real estate can be seen in decreasing vacancy rates and positive absorption across product types.

To download and analyze the employment and other economic data, we highly recommend the Federal Reserve of St. Louis’ free FRED economic tool.

For more from the BLS, check out recent and archived employment data and news releases available on their website.