Payrolls: Even More Bearish Than the Headline

I'm not a big fan of the monthly payrolls report, which has a 90% confidence interval "on the order of plus or minus 430,000". Payrolls fell by 63,000 in February - something which I'm sure is going to be treated as a bearish indicator by the market. But if they'd risen by say 200,000 - which would be well within the margin of error - that would have been incredibly bullish. Meanwhile, of course, the unemployment rate (not particularly reliable, we know) went down. It's all a bit of a mess, but the market pays close attention to it because it gives hard macroeconomic numbers more or less in real time.

If you do want to get something useful out of this report, it's worth taking some advice from Megan McArdle:

The BLS lists figures for "discouraged workers" who say they want to work but are not looking for a job for economic reasons, and "marginally attached workers", who say they want to work, and have looked for work in the last 12 months, but did not seek work in the last four weeks for some personal reason. These are in the labor report right beneath the "headline" unemployment figure; it's just that journalists usually ignore them. That is a problem, but something the Bureau of Labor Statistics (BLS) cannot control.

Well, let's look at those numbers. Payrolls fell by 63,000, we know; employment fell by a much larger 255,000. And the "not in labor force" number spiked alarmingly, rising by 644,000.

So yes, this is a bearish report. Although I still think it's given far too much weight.