Why the January 2013 U.S. Jobs Report May Surprise You

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The U.S. employment picture is expected to show continued signs of improvement when the Labor Department releases January's U.S. jobs report Friday morning.

Projections are for nonfarm payrolls to have gained 168,000 employees during the first month of 2013.

While a decent number, the tally won't be enough to budge the nation's 7.8% unemployment rate.

Forecasts from 90 economists polled by Thomson Reuters range from a 75,000 gain on the low end to a 200,000 gain.

In December, the number was a surprisingly robust 155,000. Over the past two years, the average has been 153,000 per month.

"We started the year on a pretty solid footing. I think the report is going to be a little bit better than what most people think," Steve Blitz, chief economist at ITG Investment Research, told the International Business Times.

But a number of factors could skew data in the U.S. jobs report. Here's what you should watch for.

What to Expect from the January 2013 Jobs Report

A reporting issue that happens every January could affect this month's results.

The Bureau of Labor Statistics (BLS) has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey.
Both the payroll and household surveys are needed for a complete picture of the labor market.

Every January the BLS includes the latest population estimates into the household survey, which can change the size of the labor force which affects the unemployment rate.

Since the Labor Department doesn't revise December's population numbers, there can be a wide gap between December and January jobs numbers, when it wasn't the jobs number that actually moved.

"January's monthly changes in household employment and the labor force should be interpreted with care," Paul Dales, a senior U.S. economist at UK-based Capital Economics, wrote in a note to clients.

The BLS will also integrate the results of the annual benchmark revision to past payroll figures.
The amendment is based on the accurate count of unemployment insurance records, deemed more reliable than monthly surveys.

Early estimates are for the BLS to revise nonfarm payrolls for the first quarter of 2012 up by 32,000 a month, to 386,000. Data for the rest of the year will also be tweaked, but no guidance has been given.

Also, one sector that could skew data is the construction industry.

The industry got a temporary boost in December, adding 30,000 jobs as clean-up efforts following Superstorm Sandy and an unseasonably warm winter throughout most of the U.S increased the number of jobs available in the sector.

Cautious Signals Ahead of Jobs Report

There have been some mixed signals this week ahead of the BLS jobs report.

The manufacturing sector is expected to have increased headcount in January by 10,000, following 25,000 jobs added in December.

But following a dismal GDP report Wednesday showing the economy shrank 0.1% in December, the first slump in three-and-a-half years, the number of jobs added in this industry may come in short of projections.

Also casting doubts for a strong showing Friday is the uptick in initial jobless claims (which reflect weekly firings) for the latest week. The number tends to decrease as job growth accelerates.

Claims for unemployment benefits rose more than forecast in the week ending Jan. 26 to 368,000, the Labor Department reported Thursday. Economists were looking for filings to come in around 350,000. The 38,000 increase was the most since Nov. 10, and reflects the complexity of adjusting figures at the start of a year.

In addition, the number of people who continue to collect benefits rose by 22,000 to 3.2 million. Those who exhausted traditional benefits and are now collecting emergency benefits rose 418,000 to 2.11 million.

A number of firms continue to reduce headcount amid the budget battle, increased taxes, Obamacare and sequestration.

Boston Scientific (NYSE: BSX), the second biggest maker of heart devices, just announced a 1,000-employee reduction in its workforce.

Financial services firms are on track to hand out the most pink slips since the start of 2009, just after the fall of Lehman Brothers. The whopping 16,040 job cuts announced this week are just shy of the 16,389 made following Lehman's demise. Those shedding workers include Morgan Stanley (NYSE: MS), American Express (NYSE: AXP), Bank America (NYSE: BAC) and Citigroup (NYSE: C).

The U.S. military has also laid off thousands of temporary workers and warned of furloughs as it braces for a year of budgetary uncertainties, which could weigh on the jobs report.

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  1. Tony Igwe | February 1, 2013

    We are told that the measure of the GDP that includes govt spending is misleading, practically a double count of real production which happens in the private sector. I totally agree with that assessment. Why do we still have the same people drawing conclusions from these same numbers – seemingly to back up some particular line of thought?

    IMHO, if the GDP is down because the govt spent less of our money, that's a wonderful development that would lead to real resurgence in the productive parts of the economy.

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