I Hate the Monthly Jobs Report

I’m almost afraid to admit this, but I hate, hate, hate the monthly jobs report. There. I said it—and I know I speak for many others. The monthly jobs report needs to go die in a fire.

It’s almost a mystery this highly misleading and often inaccurate economic report came to be the most important monthly event on Wall Street. And when I say event, I’m not exaggerating.

On the first Friday of each month, the international finance world comes to a halt to hear the Bureau of Labor Statistics release some numbers that might as well be completely random. It’s just an estimate and a rather poor one at that. I’m especially tired of people thinking this report is an accurate portrait of the jobs market when in reality these figures have all the solidity of the summer breeze.

Of course, the jobs number will get revised next month, and the revisions to the revisions get revised again. Jeff Miller, who’s been bravely leading the charge on the BS from the BLS, points out that the payroll number has a confidence interval of plus or minus 105,000. You got to be effing kidding me? That’s not even close to being accurate. Do they say this rather important fact on the evening news? Of course not. The household survey is even worse. The plus or minus is 450,000 jobs. The deeper analysis of the report consists at the looking at the sub industries but the error margin there is even wider.

Imagine watching a football game where you didn’t know the score and the refs are constantly reversing calls from two quarters ago. That’s about where we’re at.

What should be done? Here’s an idea: Wall Street should say to the government, we’d like to have an accurate picture of the labor market, that’s not endlessly revised and without too much lag time. Tell us the truth. If it can’t be done, that’s fine. We’ll move on. If the only accurate report takes nine months or a year, then Wall Street should drop its focus.

There are lots of good reports that don’t have much lag time. Corporate earnings. The ISM Index correlates fairly well with NBER cycles. It’s rarely revised and it comes out on the first business day of the next month. Industrial production also lines up well. We get how these work.

The jobs report is obviously the most important report politically which is an even greater argument for accuracy. This is a sensitive area and as an investor I believe that no data is better than bad data. If we can only use a survey, fine—make it broad and shallow. If the report needs to be revised each month, fine—delay it for a few months. Focus on some jobs metric with a greater confidence interval. Just stop jerking us around.

If the Feds simply can’t get a good number, then work with some public-private consortium. There’s got to be a better way than what we have now.

Posted by on December 6th, 2012 at 9:25 am

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