Was the March to April Increase in Jobs the Best in 25 Years?

Was the March to April Increase in Jobs the Best in 25 Years?

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That is true according to headlines in the paper as a local analyst proclaimed the increase to total non-farm jobs from March to April of 24,600, the best March to April jump in the last 25 years.  Is this a sign of a rebounding economy for the Pittsburgh MSA?  Well, perhaps not.  There are a few problems with this proclamation.

 

First, the data being referenced is coming from preliminary reports.  The April 2015 total non-farm jobs number of 1,175,600 will be adjusted next month, up or down, when the numbers are finalized.  In fact the finalized March 2015 number of 1,151,000, to which the April number is being compared, was revised upward from its preliminary value of 1,149,200.  Comparing preliminary values, the March to April jump would have been even greater (26,400).

 

Secondly there will be a benchmarking revision that will take place early in 2016 that may wipe out much of this increase.  It happens every spring.  When the analyst looked at previous monthly changes, most likely online through the Bureau of Labor Statistics website, he was looking at data that had already been benchmarked.  For example looking at the last few March to April changes, the last three had been revised downward, the last two significantly.  In 2014, the press releases showed a March to April gain of 22,700 jobs.  This spring, after the rebenchmarking, it was revised to 16,200—a loss of 6,500.  The drop in 2013 was even more pronounced going from a gain of 21,800 to 10,200—a loss of 11,600 jobs.  The 2012 increase was reduced slightly from 10,800 to 9,700.  The exceptions were from 2011 (up 400) and 2010 (up 1,700), but the MSA was rebounding from the recession and the jumps were slight.

 

Finally, the source of the job increases is suspect.  Seventy percent of the 24,600 increase is centered about three industries:  construction (6,300), professional and business services (3,800), and leisure and hospitality (7,200).  The first, construction, represents a thirteen percent increase.  These numbers are of course non-seasonally adjusted and so with the weather improving in April, and Act 89 money (see Policy Brief, Volume 13, Number 60) pumping up road and bridge construction, this gain is plausible although only barely.

 

While the increase to the professional and business sector would be a positive, the gains actually accrue to the administrative and waste services subsector (2,900 or a jump of 5.65 percent) from March to April.  This is an unusual gain considering that the year-over-year totals (from last April removing the seasonality) had fallen by 3,000.  It lends suspicion to the number.  Finally, the boost of 7,200 to the leisure and hospitality sector is comprised of a 3,300 bump to the art, entertainment, and recreation subsector.  As we had written about before (Policy Brief, Volume 14, Number 33), this subsector is quite small, and the sample size too low to permit a separate estimate of jobs at the Pittsburgh MSA level, but can be deduced using simple math.  For the past year or so it accounted for large job gains each month, yet those were mostly wiped out by benchmark downward revisions (Policy Brief, Volume 15, Number 23).

 

Thus it is difficult to get too excited over this month-to-month increase to total non-farm jobs as a sign the economy is improving dramatically.  Recent history shows that revisions can take, and very often do, a large bite out of the data, long after the headlines have faded from memory.