Are the jobs numbers correct?

Previous jobs reports have been subject to huge revisions. One oddity in the latest report might indicate a future revision as well.

By Jim J. Jubak Apr 6, 2012 4:53PM
Image: Construction workers (© image100/Corbis)Talk about a bad set up for first quarter earnings season that starts on Tuesday.

Friday, the Department of Labor announced that the economy added just 120,000 jobs in March. That was down from 240,000 new jobs in February and below the median forecast among economists surveyed by Bloomberg of 205,000. The March disappointment also broke a string of months with gains of 200,000 or more.

Friday's numbers are a dose of cold reality thrown on any inclination that the U.S. stock market might have to look past disappointing first-quarter earnings figures on the hope that U.S. economic growth for the rest of the year would be stronger than expected. First-quarter earnings are forecast to have grown by just 0.93% from the first quarter of 2011, according to Standard & Poor's Capital IQ. In the first quarter of 2011, the annual earnings growth rate was 19.7%. First-quarter earnings season officially kicks off with Alcoa's (AA) report after the market close on Tuesday.

The number of new jobs wasn't the only measure that fell in March. Weekly hours worked fell to 34.5 from 34.6 in February. Hourly earnings increased by 0.2%, but with the economy creating only 120,000 new jobs in March, aggregate wages were flat on the month after climbing 0.7% in February. That's not good news for an economy in which consumer spending makes up 70% of all economic activity.

The official unemployment rate did drop to 8.2% from 8.3%, but that was only because 330,000 people left the workforce.

Oddly enough, the full unemployment number, the one that counts discouraged workers who have stopped looking for work and workers in part-time jobs who are looking for full-time jobs fell in March to 14.5% from 14.9%.

That oddity raises an important question: Are Friday's numbers correct? The jobs numbers have been subject to huge revisions in the slow recovery from the Great Recession. Remember August 2010 when the initial report showed the economy added no jobs? That initial result was revised upward the following month to 100,000 jobs added in August.

Statistically, as Ezra Klein points out on the Washington Post's site Friday, there's a 90% confidence level that the economy added somewhere between 20,000 and 220,000 jobs in March.

That's quite a margin of error. In the short-term, I doubt that the market will care about the quality of this evidence of a slowdown in the economy. In the short-term this is yet one more reason to sell after the great first-quarter rally. If you were inclined to think longer-term, however, I would wait for the revisions in early April before drawing any conclusions about U.S. growth.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 
Tags: AA
Apr 6, 2012 5:15PM

So, let's summarize...unemployment fell from 8.3% to 8.2% because 330,000 people left the workforce but the full unemployment number,the one that counts discouraged workers who have stopped looking for work and workers in part-time jobs who are looking for full-time jobs fell in March to 14.5% from 14.9%. This cannot be mathematically correct and is also illogical. It simply does not compute that more people (330,000) dropped out of the workforce, but the "full unemployment" rate improved from 14.9% to 14.5%.

Clearly our government's employment numbers are bogus. Why isn't the press investigating this? 

Apr 6, 2012 5:27PM
I have a lot of friends that are still looking for those shovel ready jobs created during the summer of recovery that we spent a trillion dollars on. The truth is if you look at the unemployed, the self unemployed and those that have quit looking for work were at about 20% unemployment in this country. Not to mention the under employed. This president excepts no blame for anything but goes out of his way to take credit for a recovery that doesn't exist. Our media by not telling the truth just to get there man elected is going to destroy this country as we know it or worse get us killed.

Apr 6, 2012 5:26PM
I am a pessimist, but I also live in the real world.  I somehow think these numbers are being skewed by the current administration.  I might be more inclined to belive all of this stuff if this was not an election year, but it is.  As far as I can tell this is all propaganda, I do not think things have really drastically improved like we have been being told since the campaigning started.
Apr 6, 2012 5:36PM

Does anyone really know what is going on for real?

Unemployment, Gas prices,

The whole thing just sucks and that the whole thing in a nut shell.  Smile

Apr 6, 2012 6:07PM
The recently passed payroll tax extension law included cutting people off unemployment from 99 weeks down to 63.  In indiana, the cuts have started and these people will no longer be counted as unemployed.  This is good for the numbers but not a real indicator of reality.  Both parties agreed to this, cutting the unemployed and raising the retirement age (screwing the elderly), is the only way these two parties can save a buck.  Anybody got some suggestions?  We the people, White, Black, Hispanic, Asian, Indian, etc. need to band together and form a new party.  Because what we have isn't working.
Apr 6, 2012 5:42PM
Your right Ray, Something's Rotten in Denmark, However those born in 1947 are turning 65 this year. They are the forerunners of the Baby Boom Era, for the next 15 years we should see a large number of retirees dropping our of the work force and sense there are very few jobs many may be simply retiring early, because most 65 year olds aren't interested in moving to N .Dakota and starting over. We'll probably see a revision of the numbers next week.Birthday cake
Apr 6, 2012 6:18PM

Are the people who are no longer on unemplyment counted?

Those people are still looking and are not counted.  When are we going to wake up and realize we are continually being bamboolzed by the media and the Democrats?

Apr 6, 2012 6:05PM
Obama finally got caught screwing the election this
Apr 6, 2012 5:57PM
There is no fix for technological unemployment. Just think about it. There is an inevitable conclusion.
Apr 6, 2012 6:25PM
You can't believe anything the government tells you anymore.  Especially when it comes to unemployment and inflation. It is a sad day in the U.S.A. when this country seems more like I am living in a communist country than a so called democracy..
Apr 6, 2012 8:00PM

The sad thing about all of this, is that the general public has pretty much lost faith in our political process.  It seems like every one in politics is only interested in getting re-elected and is not doing what is truly best for our country.

Apr 6, 2012 6:07PM
Jobs numbers haven't been correct since Reagan changed how they were calculated so he could hide the true numbers and pretend the economy was doing well. Every president  and media outlet since has used the same, false information to perpetuate the false impression the economy is doing better than it really is. The true unemployment rate is between 8 and 10 points higher than what is reported.

What a stupid article.

Apr 6, 2012 8:10PM
What I don't understand is that the majority of the people feel the government does not tell the truth and that many of the reports on housing, unemployment, job creation etc. are all manipulated.  So why does the market continue to go up on the reported data when the majority of the people know the data is not accurate nor is as positive as portrayed?
Apr 6, 2012 7:43PM
I have a 99.99999999999% confidence that the government will say everything is getting better every day.  We on main street know 'better' and this ain't it.
Apr 6, 2012 6:39PM
As has been pointed out before the numbers only reflect what is reported voluntary ,they do not have to report if they wish not to. So what you see is not correct an never will be!!!!!! no one has any idea what the true numbers are. not even the ones who make up these reports, JUST GUESS WORK.
Apr 6, 2012 8:07PM

"The nation's jobs picture got a weaker-than-expected shot in the arm Friday, following a report from the Labor Department that showed the economy created 120,000 jobs in March well below analyst expectations of 200,000 newly created positions."


Maybe the truth is coming out afterall and the economy is not as "robust" as the so called "experts" would like everyone to believe.  Any of course since the number came in well below the estimated 200,000 it is assumed there has to be an error.  However, if the number came in above the 200,000 estimate then the "experts" would explain it as a much improved economy etc.  Getting an accurate new job creation number should not be all that difficult.  Since every company is required to fill out certain paperwork and then report to the government when a new employee is hired it should be a simple calculation as to the actual new hirers per month.  It will be interesting to see how much "damage control" the Labor Dept does before next Monday to help eliminate a drop in the market due to the negative report.  I look for them to come up with an excuse that something wasn't calculated correctly etc. and there will be a revised report showing that there were close to 250,000 jobs created so of course then the investors will "cheer" the good news and the market will "soar".     

Apr 6, 2012 6:32PM

The Unemployment Rate will go to 0% if they just keep eliminating the people who have run out of eligibility for benefits. Who are they kidding? If you lose everything and have to live under a bridge you no longeer count as unemployed?


Barak Obama is the worst thing that has ever happened to the poor people in this country. He doubled the price of gas in three years and spend Billions of $ on electric cars which no poor person will ever be able to afford.


There are more people on food stamps than ever before and less people with helath insurance than before he passed Obamacare.


All of the numbers are just made up by some moron like Timmy the Geek Geitner.


Liar, Liar, Pants on Fire

Apr 6, 2012 7:39PM

This is O-BLAH-BLAH controled media at its finest, just like states can't have the same laws the feds can.( look at what was passed in Az. but shot down by the feds.)


jlum..... Didn't you hear? The recession ended 2 years ago. Just ask O-BLAH-BLAH or his lame-stream media.


I just wish the media was not so afraid of O-BLAH-BLAH, and would actually report the real news.

Apr 6, 2012 9:30PM

So when the Jobs numbers are up,-no need to question validity, but when they're down, well the numbers must be wrong- perfect.


If you understand how the BLS (Bureau of Labor Statistics) estimates the unemployment rate then you might have an idea of just how “off” these numbers could be.


As for the “count” error, the BLS site says it may be as large as +/-290,000, and that is a very large “margin” of error. Unfortunately that number tends to indicate that the “Bureau” is using the population count of 290 million from the 1990 census, which is now 22 years old.


Reading through the BLS information there appears to be a 5 (Five) year lag in the application of the latest Census data. That means that every year the margin errors grow larger and larger. They never catch up to the actual population.


The 1990 Census data was not fully applied to BLS numbers until 1995. The 2000 Census data was not fully applied until 2005. So I am assuming that the 2010 Census is not currently applied to the 2012 BLS figures. So it’s always under reported either way.


The BLS computes the unemployment rate using the “CPS –Current Population Survey”. They take 60,000 homes and 110,000 people from 2025 geographic areas and the select 824 areas to be the sample set. When you cross check those numbers with their “methodology explanation” you get a completely different set of numbers used to estimate Employment and Unemployment.


The worst part of this is that the BLS states that “Since monthly unemployment totals have ranged between about 7 and 11 million in recent years, the possible error resulting from sampling is not large enough to distort the total unemployment picture.” 2008 and 2009 were not “normal years”.


Their web site says that their data was last update on 10/16/2009 and 4/13/2003 for methodology explanation.


Too many assumptions are being made on previous sample errors. Do I think the numbers are wrong …yes, yes I do.


Apr 6, 2012 7:02PM

Now are we ever going to get the true story from the stock market . you know the true numbers an so on, they only give us what they want us to see.

 I wonder how long it will take congress to figure out to get around the new insider trading law?. Are they going to show us their portfolio monthly or quarterly????????

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