Why the jobs report only tells part of the story
April’s non-farm payrolls report told us many things. Things such as the fact that 223,000 jobs were added in April — or that March wasn’t as good a month as we thought — and that wages are still just barely growing.
By many accounts, the monthly jobs report is really the best way we have of measuring what a healthy economy is supposed to deliver: jobs. Still, there is quite a bit more information economists wish they could glean from the jobs report.
Harvard economist Ken Rogoff says data from the jobs report is still just an estimate.
“They’re very volatile, they involve statistical sampling,” Rogoff says. “You know, they’re not hard data, there’s a lot that they don’t pick up.”
Justin Wolfers, an economist at the University of Michigan, points out that jobs numbers come with a margin of error of 100,000, which is quite a lot. Moreover, he wishes the data had more specific information about the quality of jobs being created.
“You know, there are good jobs in retail and there are bad jobs in retail. Knowing a lot more about the details, what types of jobs are being created, would be tremendously helpful,” Wolfers says.
Because the jobs report is just a snapshot in time, economists don’t really know where the jobs are coming from. For instance, are jobs being created by employers on the supply side? Or are they simply a reflection of the fact that more people are entering the market? And perhaps most importantly, what are we benchmarking to?
“We have this sense that we’re not back to full employment, but we don’t know where full employment will land,” says Diane Lim, an economist at the Committee for Economic Development in Washington.
“You know there are all kinds of things changing at the same time and economists have always faced this challenge that we can never run a perfectly controlled experiment and say, ‘This is the cause, because we held all else constant,’ because we can never hold all else constant,” Lim says.
One thing economists are wrestling with, according to Lim, is whether the current good numbers are simply a recovery from recession, or part of a longer-term growth trend.
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