Friday’s jobs report from the Bureau of Labor Statistics showed a surprisingly robust 467,000 new jobs created, well north of what many economists expected. It also showed that some 217,000 more jobs had been created over the course of the last year than originally reported.
The average economist’s guess was that the economy would add 150,000 in January, and some analysts had actually predicted a net loss of jobs. Analysts at Morgan Stanley, for example, expected a 215,000 job loss, citing comments from Federal Reserve officials and the White House.
The White House was widely seen as trying to prepare the media and public for a bad number. Press secretary Jen Psaki pointed to “nearly 9 million people [who] called out sick in early January when the jobs data was being collected” and that “the month’s jobs report may show job losses in large part because workers were out sick from Omicron at the point when it was peaking during the period when — the week where the data was taken.”
Instead, the new jobs created were much higher, and, perhaps even more surprisingly, 709,000 new jobs were created in November and December, compared with initial reports of 249,000 and 199,000 (for a total of 448,000).
“The pace of payroll gains was quicker than they thought,” said Nick Bunker, an economist at the job-listing site Indeed. “When you look at the raw size of those revisions, they are quite large, [but] so is the underlying pace of payroll growth.” In short, when the job market is hot, revisions can look larger than they really are. “It’s not well outside the range of what we’ve seen before,” he added.
Economic data is constantly getting revised
Though it’s popular to have quick takes on the monthly jobs numbers, those numbers are often different than they look on first glance. The numbers are both revised on a three-month rolling basis and annually.
The more frequent revisions take into account employers returning the survey for a certain month within the three-month window they’re given by the BLS.
Then the annual benchmark revision process uses more up-to-date data to build a better picture of the size and composition of the labor market and population. The BLS uses updated unemployment and tax records, and typically the revisions “average plus or minus one-tenth of one percent of total nonfarm employment,” according to the BLS. Overall, there are about 150 million nonfarm jobs, the change in which makes up the headline jobs number.
They’re often getting revised over time, as the BLS did for 2021 on Friday. The agency found that the summer jobs boom, including the July report that showed over 1 million new jobs, was not as hot as previously reported. June and July job growth was collectively 807,000 jobs short of the preliminary figures.
Looking at the revised data, last summer’s jobs boom turned out to be a bit less hot, and the winter’s jobs slump was much less slumpier than it seemed.
The new data shows a job market that was growing more steadily than originally thought based on the initial data.
Covid did still loom over the jobs numbers. The employment situation report is made up of two surveys, one of businesses and the other of households. The latter survey showed that the number of people who were “Employed - With a job, not at work, Own illness” in the parlance of the BLS had soared to 3.6 million, about 2 percent of the total population either working or looking for a job; in January 2021, the figure was at about 2 million, and in 2019, well before covid-19, it was at just over 1 million.
Furthermore, the household survey found that 6 million people said they couldn’t work in January “because their employer closed or lost business due to the pandemic,” almost double the 3.1 million who said so in December. But still, overall, the household survey reported increases in employment and the size of the labor force.
Another reason the jobs number could have been stronger than expected was that typical seasonal hiring patterns may have changed. There’s a large amount of hiring toward the end of the year in retail and warehousing to account for the holiday season surge. The jobs numbers try to iron this out with “seasonal adjustments” that take into account historical patterns of hiring and layoffs.
The retail and transportation and warehousing sectors made up a quarter of the overall job gains and are two sectors that feature substantial seasonal adjustments toward the end and beginning of the year.
But, Bunker said, it could be the case that employers held on to those workers more than they historically have in order to deal with a very tight labor market where more workers are leaving their jobs and layoffs are sparse: “In a tight labor market, lots of employers might be more reticent to lay workers off. The hiring market is more difficult than it has been in quite some time for many employers.”