Another new month means another monthly unemployment reading tomorrow. Last month, we saw the official unemployment rate decline to 9.7% from 10.0% in December. At this point, tomorrow's reading is set to be a very strange one. All kinds of odd effects from seasonality to snow storms to labor productivity might have affected hiring in February. That just makes it all the more difficult to figure out what tomorrow's data will show. But as usual, we'd like to give readers a shot at guessing what they think it will be.
But before voting, consider a few things. First, it's true that last month, the official employment rate did decline. Yet, as my analysis showed, the news wasn't as good if you ignore seasonality and consider broader measures of underemployment including discouraged and part-time workers. Then, the rate jumped up 18%.
As far as seasonality is concerned, a chart I used last month comparing seasonally adjusted and unadjusted data showed that the variance widens in January. That distance shrunk slightly between the two curves in February last year, meaning that more of the seasonal correction disappeared and the adjusted unemployment rate increased accordingly. So that could drive unemployment a bit higher.
Also notable were the snowstorms. They might have made unemployment worse, since businesses couldn't hire as quickly due to weather. Yet, this might have created some part-time jobs for snow shoveling, so this could affect the broader underemployed rate more than the headline unemployment rate.
Other measures of unemployment for February have been optimistic, but not indicative of job growth just yet. Yesterday, ADP reported (.pdf) 20,000 jobs lost in February. That's the smallest decline since February 2008. Due to the way it derives that number, however, the bad weather has no effect. Today, we learned that the Department of Labor's weekly jobless numbers got a little better in the week ending Feb. 26th, with initial claims declining by 29,000 versus the prior week. That was after initial claims increased by 56,000 from the weeks ending Feb. 5th through Feb 19th.
There's some doubt to how meaningful tomorrow's number will be, due to all the strange circumstances surrounding February. But it will be highly analyzed nonetheless. Last month, respondents to our poll did incredibly poorly -- a mere 2% correctly guessed that the rate would drop to 9.7%. Let's try to do better this month: