Sometimes the U.S. jobs report is like Dr. Jekyll and Mr. Hyde. One part of the report can look great, but another is ugly.
The November jobs report also has a split personality, but Wall Street is giving more credibility to the good doctor.
Let’s look at Mr. Hyde first. The ugly part of the report was the tepid 210,000 gain in new jobs — the smallest in 11 months. Wall Street had expected an increase more than double that size.
The weak headline number — taken from a survey of businesses — suggests the worst labor market shortage in decades is holding back the economy.
Businesses simply can’t find enough workers, the story goes, to produce all the goods and services that customers demand.
But maybe it’s not as bad as it looks. Now let’s turn to the handsome Dr. Jekyll.
Another part of the November jobs report showed a whopping 1.13 million people found work last month, based on a separate survey of households. That’s great news.
The household survey also showed nearly 600,000 people entering the labor force and unemployment falling to a pandemic low of 4.2%.
“This report is a tale of two surveys,” said Nick Bunker, the economic research director at Indeed Hiring Lab.
What to believe? Here’s where it gets dicey.
The 210,000 increase in payrolls comes from a regular survey of businesses and government agencies that is seen as very reliable. The survey queries almost 700,000 work sites each month to gauge how many people are employed.
Another survey of households is used to determine the unemployment rate. The same survey also showed that more than 1 million people obtained work in November.
Yet because the household survey only polls 60,000 households each month, it’s not nearly as accurate. Its margin of error is about five times larger than the payroll survey.
Which is why the payroll number — 210,000 in this instance — gets the lion’s share of attention each month.
That’s not the case with the November report. Most economists think the household survey told a more accurate tale of the jobs market. More people are entering the labor force, they believe, and more people are finding jobs.
One possibility, some economists say, is that the government’s seasonal adjustments that produced the 210,000 payroll number have been thrown out of whack. The raw figures showed that hiring was much stronger.
The seeds of the problem may have originally early in the pandemic, when the Labor Department changed how it adjusts the payroll figures for seasonal employment patterns.
Now its revamped method might actually be producing more erratic results for the payroll survey than the household poll. The payroll figures have been all over the map since last summer.
“Historically, the household survey has been more volatile and thus less reliable,” said chief economist Aneta Markowska of Jefferies LLC.
“But if people are truly shifting from employment to gig work — as many have during the pandemic — then the household survey might actually be painting a more accurate picture of the labor market because it captures all workers.”
How will we know for sure? Stay tuned. The next several months of jobs reports should give a clearer answer.