I can say with certainty that there will be no job gains in the US in January.
However, the consensus for January’s non-agricultural employment report is +178,000 jobs. How could that be?
The answer is seasonal adjustment. The non-agricultural employment report is seasonally adjusted, so it is a figure that smoothes out the employment of teachers and seasonal labor. It’s designed to look at things like temporary retail jobs in December, and it’s also designed to look at layoffs in January.
The reason I’m sure January will include layoffs is because there are always layoffs. As KPMG’s Diane Swonk highlights, the average number of job losses in January during the 2010s was 2.87 million.
Last year, there were just 2.5 million layoffs, which is a big reason why nonfarm payrolls “gained” 472,000 jobs in 2023’s best month of the year.
Payroll calculation for non-agricultural sectors
Seasonal adjustments will continue to be a factor in Friday’s report. The problem is that the pandemic may have distorted many seasonal factors, leading to unusually strong January numbers. This is reminiscent of the period after the financial crisis when initial unemployment claims were revised upward by +40 weeks in a row until the methodology was revisited.
Many economic indicators are expected to struggle with seasonal adjustment in the coming months and years.
