Slowdown in employment growth in March, however you measure it

The Bureau of Labor Statistics (BLS) employment report released today shows that a mere 98,000 new jobs were added in March, far below analysts’ expectations of 180,000. In this blog post, I will put forward two alternative projections for job growth in March 2017, each of which was calculated using methodology outlined in my past research.

Calculating the Alternative Seasonal Adjustment

Monthly job gains and losses can indicate how the economy is doing once they are corrected to account for the pattern the BLS already expects in a process called seasonal adjustment. The approach for this seasonal adjustment that is presently used by the BLS puts very heavy weight on the current and last two years of data in assessing what are the typical patterns for each month.

In my 2013 paper “Unseasonal Seasonals?” I argue that a longer window should be used to estimate seasonal effects. I find that using a different seasonal filter, known as the 3×9 filter, produces better results and more accurate forecasts by emphasizing more years of data. The 3×9 filter spreads weight over the most recent six years in estimating seasonal patterns, which makes them more stable over time than the current BLS seasonal adjustment method.

To produce the Alternative Seasonal Adjustment, I calculate the month-over-month change in total nonfarm payrolls, seasonally adjusted by the 3×9 filter, for the most recent month, which you can see in table below. The corresponding data as published by the BLS are shown for comparison purposes. According to the Alternative Seasonal Adjustment, the economy added 70,000 jobs in March, 28,000 less than the official BLS total of 98,000.

Calculating the Seasonal and Weather Adjustment

In addition to seasonal effects, abnormal weather can also affect month-to-month fluctuations in job growth. In my 2015 paper “Weather-Adjusting Economic Data,” Michael Boldin and I implement a statistical methodology for adjusting employment data for the effects of deviations in weather from seasonal norms. This is distinct from seasonal adjustment, which only controls for the normal variation in weather across the year. We use several indicators of weather, including temperature and snowfall.

Temperatures in March were slightly warmer than usual, and snowfall was slightly above average. Controlling for weather yields a higher Seasonal and Weather Adjustment estimate of 162,000 new jobs. Because January and February were mild in terms of temperatures (boosting employment changes in those months by 24,000 and 21,000, respectively), the large negative weather effect in March likely reflects a bounce-back from unseasonably mild weather earlier in the year.

Even after Seasonal and Weather Adjustment, the data show some slowdown in employment growth in March. But it is modest once the Weather Effect is removed. The pace of employment growth was fairly stable over the last three months under the Seasonal and Weather Adjustment, averaging about 184,000 jobs added per month.

Note: Changes in previous months’ numbers reflect revisions to the underlying data.

^[1] Applies a longer window estimate of seasonal effects (see Wright 2013).

^[2] Includes seasonal and weather adjustments, where seasonal adjustments are estimated using the BLS window specifications (see Boldin & Wright 2015).

^[3] BLS Official number less the Seasonal and Weather Adjustment number.

The author did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. He is currently not an officer, director, or board member of any organization with an interest in this article.