Six Key Issues That Skewed the Payrolls and Unemployment Report

This week’s report from Department of Labor was disappointing. Sure, the official unemployment rate dipped to 6.6%. That was in-line with expectations, but it truly feels like skewed data when you look at the big picture. Total nonfarm payrolls came in at a meager 113,000, and private sector payrolls grew by about 142,000.

24/7 Wall St. warned readers that this month’s employment situation report would be skewed by the absence of those in the labor force who lost their extended unemployment benefits in January. This was simply too big of a number to ignore.

After looking at the Bureau of Labor Statistics (BLS) data, six things stood out as to why things looked skewed in January.

1. Changes to the Employment Situation Data

The BLS said, “Establishment survey data have been revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors. Also, household survey data for January 2014 reflect updated population estimates.” The numbers were benchmarked to reflect comprehensive counts of payroll jobs for March 2013.

2. Long-Term Unemployment

The BLS data showed that the total number of long-term unemployed, those on benefits for 27 weeks or more, fell by 232,000 in January to 3.6 million. This is 35.8% of the total unemployed. The BLS showed that long-term unemployed has declined by 1.1 million over the past year.

3. Annual Adjustment to the Population Controls

The civilian labor force was shown to have risen by 499,000 in January. The labor force participation rate ticked up to 63.0% from 62.8% in December. This remains close to a 35-year low. Total employment in the household survey rose by 616,000 over the month, and the employment-population ratio increased by 0.2 percentage points to 58.8.

4. Part-Time Effects

The number of persons employed part time for economic reasons showed a drop of 514,000 to 7.3 million in January. The BLS said, “These individuals were working part time because their hours had been cut back or because they were unable to find full-time work.”

5. Marginal Attached Workers

Some 2.6 million people were considered to be marginally attached to the labor force in January. While this is noted as “little changed from a year earlier,” they were not counted as unemployed because they had not searched for work in the four weeks ahead of the survey. In the marginal group, there were 837,000 discouraged workers in January — people not currently looking for work because they believe no jobs are available for them. The remaining 1.8 million persons marginally attached to the labor force in January had not searched for work for reasons such as school attendance or family responsibilities.

6. Weather

Cold weather in the Midwest and Northeast has to be a factor here in jobs not getting filled. That being said, the revision in nonfarm payrolls for December was only by a tiny 1,000. Weather is permitted to be an excuse, but at some point people looking for work (and companies that have job openings and interviews) cannot get away with the excuse that they just could not physically make it there.

The points brought up here are directly from the BLS, and color has been added or explained. The numbers just do not seem right on the surface, but — as usual — there are explanations for what may be driving this. Of the 12,000 decline in government employees, the U.S. Postal Service was shown to be 9,000 of that number.

All these exceptions or skewed data prevented the unemployment report from wildly swinging stocks and bonds on Friday.