My Miss on Jobs

I don't know how many of you noticed, but I missed by a mile on jobs. Payroll employment fell by 524,000 in December, a bad number to be sure, but far below the 900,000 I had expected earlier in the month. It was a large miss plain and simple--I offer no excuses. I do, however, have some thoughts on the number.

First, unemployment claims settled back somewhat from their early month highs. By the end of the month, I had downgraded my estimates but I still expected losses of almost 800,000, still a miss of over thirty percent.

Second, I think there is information from the household survey (my estimates were all for payrolls so this doesn't change my miss). The household survey is currently running about 500,000 jobs ahead of the payroll survey in terms of annual job losses. In my experience (going back only to about 1998), whenever large differences develop between the household survey and the payroll survey, the annual revisions to payrolls pull them toward the household survey. I believe that when we get the annual revisions for 2007 it will subtract between 100 and 200 thousand jobs per month. Remember we did not know of the payroll losses in the 2001 recession until we were already out of the recession and we did not know of the payroll gains in 2003 and 2004 until we were well past.

Now to the monthly numbers (and I only mention these because they are so close to my own estimates). The households survey showed a loss of 806,000 jobs in December, and more importantly, showed an acceleration of job losses between November and December. The monthly sampling variation is too large in the household survey to take these numbers seriously. I just happen to like them this month because they match my priors.