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Wednesday, April 11, 2012

What to Look for With April Unemployment

April's unemployment rate may be key in determining whether the improvement in the U.S. jobs situation early this year was real or, alternatively, an artificial borrowing ahead of jobs due to the warm weather and an early Easter. As of April 9, Gallup's unadjusted unemployment rate stands at 8.2%, down from 8.4% in March. Using the BLS seasonal adjustment for April 2011 of +0.3 percentage points, this translates into a seasonally adjusted rate of 8.5% at this point in April 2012. While lots of time remains before the end of April, this suggests it may be well worth watching Gallup's Daily monitoring of the unadjusted unemployment rate in the days and weeks ahead.

The unemployment rate results released by the government last Friday were virtually the same as those Gallup released on Thursday. Prior to seasonal adjustment, both Gallup and the BLS reported an unemployment rate of 8.4%. In fact, Gallup's unadjusted results have closely paralleled the unadjusted BLS results since August of 2011 -- with the notable exception of February, when the spread was 0.4 points.

Gallup's seasonally adjusted rate for March was 8.1%, calculated using the BLS March 2011 seasonal adjustment of -0.3 points. The government's seasonally adjusted unemployment rate for March was 8.2%, calculated using a new 2012 seasonal adjustment of -0.2 points.

While the unemployment rate declined in March, the government's establishment survey disappointed by announcing only 120,000 new jobs created when 200,000 or more were expected. This reinforced worries that recent improvements in the jobs picture cannot be reconciled with the modest growth of the economy. It also seems consistent with claims that good weather pulled some job creation forward to January and February.

Not as well noticed is the insight provided by Gallup's Daily tracking of the unemployment rate. Gallup's seasonally adjusted unemployment rate dropped from 8.5% in mid-March to 8.1% for all of March. The question is whether this sharp decline in the last half of March is real or simply extended the pull-forward weather effects of earlier this year. Easter was early this year, on April 8 compared with last year's April 24. An early Easter not only tends to bring forward retail sales but also tends to do the same with jobs.

Since perceptions of an improving jobs situation appear to have positively affected economic confidence early this year, a reversal in Americans' job market perceptions could do just the reverse.


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