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Why the Jobs Report Means Diddly

It’s useful in a crisis. But not when we’re trying to figure out longer-term economic trends.

The monthly ritual known as the jobs report made its appearance last week, followed metronomically by the monthly ritual of commentary and political reaction to the jobs report. It was a good report, as they go, with “better-than-expected” job creation, more workers returning to look for work (hence a slightly higher unemployment rate of 5.7 percent) and major upward revisions to reported job creation in November and December of 2014.

No one, of course, could agree on what it meant. “America is poised for another strong year,” announced White House economic guru Jason Furman. “Unemployment remains unacceptably high,” shot back Republican Senator Dan Coats. The headlines ran the gamut from “A January Jobs Report Without Blemish,” to “2.9 Million Workers Still Missing,” to “Jobs Report Not Worthy of the Praise It’s Receiving.” Then the discussion quickly faded. Until the first Friday of next month, when it will flare again.

Can we please stop this silliness? How about if next month, when the Bureau of Labor Statistics releases its report, we pay it no more (and no less) heed than the “Monthly Treasury Statement” issued by the Treasury Department, the “Natural Gas Monthly” issued by the Energy Department, or the “Housing Scorecard” issued by Housing and Urban Development. These are worthy reports all, containing valuable data and information for those tasked to deal with such issues in both the public and private sectors. But they don’t occasion global statements and facile generalizations, nor do they trigger policy and partisan responses that reduce complex and vital issues to talking points and screeds.

The jobs reports, unfortunately, have been a synecdoche of what is off with our current political and economic debates. The reports contain a wealth of data on the nature of jobs, the types of jobs, the industries and sub-industries, wages, hours worked, payments, and reams of other data points. But little of that data informs our discussions. Instead, we use the number of jobs statistically added, along with the unemployment rate, and then extrapolate what that means for “the economy.” The result is a shadow-puppet discussion of our issues, along with partisan talking points and gross pundit-fueled generalizations. Lots of noise, little substance, Kabuki theater, you name it. Sound, fury signifying if not nothing, then not much.

During a fast-moving crisis or economic contraction, whether the most recent financial crisis of 2008-2009 or the recession of 1990-1991, jobs reports are a vital guide. They measure big, blunt changes in payrolls and hiring. Even though monthly numbers are revised and then revised in subsequent months, directionally they tell us which way the lumbering economic machine is moving. They can give us insight into the velocity of the crisis.

But in more stable timesthese reports are less useful. It helps to remember that until the late 1950s, the Bureau of Labor Statistics didn’t even bother to release these publicly or with much fanfare, and until the onset of the stagflation of the 1970s and then the rise of the 24/7 news cycle in the 1980s, the reports received scant attention even when they were released. The current focus on them is recent and by no means irreversible.

What, really, does it mean when we say that the U.S. economy added 254,000 jobs last month? Yes, it means that statistically, those numbers were added to payrolls, but is that a good number, an OK number, a bad number relative to a workforce of 157 million people, accounting for job changes, moves, churn, retirement, and demographic growth? Yes, directionally, more jobs created rather than less should be a positive, but numbers without context aren’t helpful.

Nor is the notion that any job is a positive. That conceit is hardly the fault of the Bureau of Labor Statistics or of the skilled and diligent statisticians attempting to corral reams of data. But it is the way we have come to use these reports. The equation is simple: more jobs=a good thing.

Yet that completely ignores what these jobs are and what they pay. The unemployment rate and the household survey do not distinguish between good jobs and bad, between well paid and not, between dead-end and career path. No, in these reports a job is a job is a job.

For our economic health and a sustainable economy, however, all jobs are not created equal. A job that is in fact entry level and pays $70,000 a year is a radically different animal than one that is seasonal or menial and pays $18,000. Yet we are creating a whole lot more of the former than the latter. Most of the job creation in recent years has been in healthcare services (orderlies, attendants) and restaurant and leisure (fast food, waitresses), retail (store clerks), and in the category of “professional and business services” that includes temporary and secretarial work in offices. The gap in employment levels by education level is stark and getting starker, with the most recent numbers showing those with a bachelor’s degree having an unemployment rate of 2.8 percent, high-school grads at 5.4 percent,and those without a high-school degree (about 11 million people) at 9.9 percent.

All that information and more is available to any who care to look, but somehow these details elude our public discussion. Wages get a bit more play, especially with an election cycle heating up and widespread discontent about the state of wages and their multi-year stagnation. But here as well, the headline means little. We talk of “average wages,” but average wages average everything, blending those $150,000 with those $15,000 a year, and then missing all sorts of cash economies and government transfer payments. The result is a muddle, to say the least, and a public discussion that falls well short of addressing the world as it is.

That discussion and then proposed policies would start not with the unemployment rate or payroll changes. It would start with wages by occupation and region, and then compare those to costs. Surely, we all know that earning $45,000 a year in Mississippi is far better than earning the same in Manhattan. Surely, we know an income of $50,000 is by itself meaningless unless we also discuss what that income can and should be able to provide in terms of housing, healthcare, education, energy bill, food, retirement.

Then we could examine what types of jobs this system is creating and what the opportunities are. Millions of jobs at Walmart and McDonald’s are fine if they are bridges to more sustainable long-term employment; they are not fine if they are the best someone can hope for.

And we could look at not just education levels but at what our educational system is preparing people for, what type of economy, and testing alone and enrollment numbers at colleges won’t necessarily spark that discussion.

That discussion would be ongoing and not lend itself to the easy hitch of simple numbers that the monthly jobs report provides. But it is the only discussion that might just get us to public and private policies that address the challenges of the world we live in. Paying less attention to the monthly jobs report won’t lead seamlessly to better policies or analysis, but it’s a start.

This article originally appeared on Politico Magazine.

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Zachary Karabell
Head of Global Strategies, Envestnet, Inc., Consultant to Investment Committee*

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