Scarborough: Something's awfully odd about this job report

Yes, there is — but it may not be what people think it is, however.  Joe Scarborough and Willie Geist both express skepticism over the “major tickdown to 7.8 percent” in the unemployment rate from the addition of only 114,000 jobs — which isn’t enough to keep up with population growth.  What happened?  Instead of focusing on that point, Mark Halperin instead points to a tweet from Jack Welch in order to marginalize the question:

Here’s the tweet from Welch:

That’s been retweeted over 1500 times so far, which demonstrates that (a) Welch has a lot of followers on Twitter — over 1.3 million — and (b) more than a few people are puzzled about this jobs report.  Scarborough and Geist are right to express skepticism, but it doesn’t have to be a conspiracy theory to say that the numbers don’t make sense.  CNBC’s senior economics reporter said the same thing in his analysis this morning, too.  If the BLS wanted to tweak the numbers to make Obama look good, though, they would have come up with a better number than +114K overall.

What is the issue, then?  Kevin Hassett reminds us at The Corner that BLS uses two surveys, the Household survey and the Establishments survey, and the +873K number comes from the former while the +114K number comes from the latter.  The media usually reminds readers/viewers that the Household survey is considered less reliable than the Establishments survey … at least during Republican administrations:

Today’s jobs report is a classic. The report, of course, reveals the results of two surveys, one of households, one of establishments. The professional economists and the press usually emphasize the establishment survey because it is viewed as less volatile. The establishment survey was terrible. The 114,000 number of jobs created on net in September is well below the average for this year (146,000) and the average for last year (153,000). This is wholly consistent with the story that the economy is decelerating sharply as we head into the fall. …

Back when President Bush presided over a jobless recovery, the household survey tended to show better news. At the time, every media organization carefully emphasized the establishment numbers, and warned that the household numbers are suspect. That, of course, is what happens when a Republican is in office. For President Obama, you can expect a household survey lovefest. The AP story that went up at 8:33, of course, emphasized the household survey, even adding, “The decline could help Obama, who is coming off a disappointing debate against Mitt Romney.” Get ready for more of the same.

Keep an eye on the U-6 measure of unemployment and underemployment, as Chris Cuomo insisted on Twitter this morning. That’s not budging from the 14%-15% range in which it has been for the last three-plus years.

Update: Jim Pethokoukis notes that one doesn’t need a conspiracy theory to show why these numbers don’t work:

Be sure to read his post.

Update II:  Here’s more from RDQ Economics, courtesy of another Jim Pethokoukis post:

This report is a tale of two labor markets.  The establishment survey (payrolls) painted a picture of moderately growing employment over the last three months but at a marginally slower pace than over the last year.  At this pace of job creation, the unemployment rate should be barely drifting lower given underlying demographic trends.  In contrast, the household survey painted a picture of a sharply falling unemployment rate—down 1.2% points over the last 12 months. Such a rapid decline in the unemployment rate would be consistent with 4%–5% real economic growth historically but much of the decline is accounted for by people dropping out of the labor force (over the last year the employment-population ratio has risen to only 58.7% from 58.4%).  We believe part of the drop in the unemployment rate over the last two months is a statistical quirk (the household data show an increase in employment of 873,000 in September, which is completely implausible and likely a result of sampling volatility).  Moreover, declining labor force participation over the last year (resulting in 1.1 million people disappearing from the labor force) accounts for much of the rest of the decline.  With this report, the ISMs, and vehicle sales, the September economy is off to a better-than-expected start but nowhere near as good as suggested by the decline in the unemployment rate.

This is why it’s better to keep an eye on U-6; it has less inherent volatility.

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