Sunday, November 17, 2013

Employment Gone Wild

Click to enlarge.

The line in black shows that 2.3 million jobs were added over the past year. This data comes from the government's establishment survey that uses a birth-death model. This model has been shown to be wildly inaccurate during recessions.

The line in red shows that there are 0.2 million more people employed over the past year. This data comes from the government's household survey that does not use a birth-death model. Although this data can be noisy, no additional inaccuracies should be present during recessions due to a faulty assumption model.

As seen in the chart, these two surveys have been wildly diverging over the past year. The former says we're doing okay and the latter says we're doing terrible. What could account for all this bewilderment? Let us hope it isn't because we're entering another recession just in time for the holiday season. Seriously.

Keep in mind that you cannot see some of the past wild divergences in the chart all that clearly. Using the power of hindsight, the government revised them away! It didn't exactly help high margin debt stock market investors who were staring at the payroll data at the time though. It might not help them now either. Just a thought!

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart

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