With official jobs data seen as a key economic metric, no wonder other agencies second-guess them. But ‘guess’ is about right
The government reported 165,000 new jobs created according April’s nonfarm payroll numbers (176,000 in total in the private sector) – a pleasant surprise to most economists, who were anticipating fewer. Part of the reason that expectations were off was because the Automatic Data Processing (ADP) jobs report predicted that only 119,000 would be created, an apparent error of 57,000. Why is this discrepancy a big deal?
Jobs reports used to be exciting only for economists and stockbrokers, but since the election season, every political junkie and their dog seems to have taken an interest. People recognize that the economy plays a vital role in deciding votes; these reports, therefore, offer a vital clue to predicting the politicians’ election chances. So, now we have both the economic and political class yearning for 8.30am on the first Friday of the month, all to learn about the jobs numbers.
But as in so many arenas in America, people can’t wait to see what happens. They race to get the answer as quickly as they can, picking up on whatever clues they deem fit. Enter the ADP jobs report, a jobs survey released two days before the official Bureau of Labor Statistics (BLS) government report. Many use the ADP to predict the BLS, but past ADP surveys have sometimes been far off actual BLS results. As Steven Russolillo noted in September, “some months, it’s spot on; others it’s wildly off base.”
The ADP, hoping to make its data more accurate, made some major changes for its October 2012 report. That month, the ADP started using ADP payroll data, BLS employment data, and the Philadelphia Federal Reserve’s Aruoba-Diebold-Scott Business Conditions Index. As a result, ADP surveyed 62,000 more clients than previously, 2 million more employees, and two more company-size classes and industries. They brought on Moody’s Analytics to replace Macroeconomic Advisers for processing data. To put it mildly, these are not small changes.
Have the adjustments brought ADP any closer to solving the monthly jobs mystery?
To answer this question, I’ve compared ADP forecasts of the past seven months with the same seven-month period last year, and looked at the ADP’s accuracy in predicting final BLS numbers. The BLS produces an initial, second, and final report as it calculates more data, and the data between reports can differ greatly. The ADP wants to land as close as possible to the BLS’s final report, though most attention is usually paid to the initial report.
The past seven months have seen an average difference between the ADP and initial BLS report of 42,286 jobs. (You can see all the data here.) Some months, such as October and November 2012, had errors of under 30,000 jobs, while March and April 2013 saw errors of 57,000 or greater. No month had an initial error of less than 26,000; the error in margin ends up within +/-19,000 of 45,000.
Compared to the same time last year, the average error has, in fact, diminished. Last year, ADP was off by an average error of 55,429 jobs, which is 13,143 jobs greater than their more recent average. This difference, however, is not statistically significant, due to a small sample size (seven observations) and the fact that the old ADP results could sometimes be very accurate.
Last year, three months under the old methods had errors of 17,000 or less, compared to the initial BLS report – far more accurate than any month per the new ADP. The problem for the old ADP was that four months last year had errors of 66,000 or greater, which less accurate than all seven months of the new ADP.
In that light, the new ADP does look better than the old. When it comes to their forecasts and the initial jobs report, we still haven’t seen an error so wrong it makes your eyes pop out. Of course, we haven’t seen stunning accuracy either.
The BLS’s final jobs report, however – what ADP should supposedly be best at predicting – apparently confounds ADP. We see zero consistency in their results. Four out of six final reports (or second report for March 2013, since we don’t have the final one yet) have had errors of 28,000 or less. Two final reports, December 2012 and March 2013, have been within 4,000. November 2012 and February 2013, though, have seen errors of over 120,000 jobs! The old ADP, by comparison, had its biggest miss last year, in January 2012, at 107,000 jobs.
The average error of the new ADP on final BLS reports has been 51,167 jobs, which is actually worse than the ADP’s error on initial BLS reports. It’s better than the average error of 58,333 from last year, but it’s not better by a statistically significant amount.
When you put it all together, I can’t really say that ADP has done better with its new methodology than it did with its old. There are some signs that the changes have made it more accurate – perhaps those huge misses of November 2012 and February 2013 will turn out to be anomalies – but we’ll need a larger sample size to know for sure. But at this point, it looks as likely as ever that the ADP numbers will be way off-the-mark measured against the BLS’s final reports.
The smart bet right now? Have a little patience and wait for the actual government statistics.
Cigarette manufacturers won a reprieve that will endanger more lives
It has been a big week for tobacco. The success of Ukip, a party keen to repeal the ban on smoking in pubs, has given cigarette companies an influential ally, one that has being doing sterling work seeking EU subsidies for tobacco growers.
Then came the momentous decision to drop plans that would have forced cigarette companies to sell their products in plain packs, something that even the powerful tobacco lobby must have thought out of its reach a few months ago.
But a relentless lobbying campaign that saw the industry channel money to spurious front groups to attack the plan has paid dividends. Stitching together a coalition that included newsagents, ex-police chiefs, retailers and brand organisations, not to mention hundreds of thousands of the public who signed a petition, the lobby strived to show the plan was unwanted and unworkable. Dire warnings were made of small shops going to the wall and thousands of jobs going abroad. The Treasury was warned that plain packs would be easy to copy, providing a major fillip to the counterfeit (untaxed) cigarette manufacturers.
Similar arguments were made in Australia by a big tobacco-funded campaign masterminded by a lobbying firm run by David Cameron’s election guru, Lynton Crosby. But Australia’s government introduced plain packaging last December. So far, there is no evidence that the dire predictions made by the tobacco lobby have been realised.
The tobacco industry argues that there is no evidence that plain packs discourage young people from starting to smoke. But inspection of tobacco industry documents released as a result of lawsuits reveals that the industry has been preparing for the battle for at least a quarter of a century. It will deny it, but the tobacco industry understands how brands lure in young smokers. It needs this new generation to replace the older one that it is killing. The UK government has a mandate to improve the health of its citizens. Last week, it failed them.
The welfare state is the latest victim of the market’s corruption of all it touches. Fighting like hell is the only option
It’s almost unbearable to wake up to a world in which the welfare state that has defended us from the worst excesses of the market is being destroyed. The only way to hold on to the last vestiges of entitlement, and even reverse defeats, is to fight like hell.
Bereaved but determined families pursuing those who neglected vulnerable patients in Staffordshire had to do a massive piece of organising before the deaths of hundreds were looked into. (Other suspect hospitals are emerging.)
Parents of children needing heart surgery organised against closure of the Leeds heart unit and won a court judgment. Then they had to struggle to prevent that judgment from being circumvented. But they did it.
Attacks on people with disabilities were unthinkable. Now suicides and premature deaths of sick and disabled people targeted by the work capability assessment and other cuts are described by campaigners as “genocide by the back door”.
Single-mother families and large families were protected. Now children in low-income families have become “extra“, targeted even before birth by adoption targets or, once born, by exclusion from schooling and social housing. Asbos and heavy sentences await the inevitable rebellion and protest, including against rising racism.
How did it get to be so threatening to so many?
When the women’s movement began in the 1970s, women were the carers. Working-class women also did waged jobs, but the wellbeing of children and others remained the primary concern. Women formed the movement not to eliminate caring but the dependence, isolation, servitude, invisibility and almost universal discrimination that a wage-dominated (ie male-dominated) society imposed on the unwaged carer.
The women’s movement faced a choice. It could embrace the market: careers for some and low-paid jobs for most. Or it could find another way to live: demanding that the work of reproducing the human race was recognised as central to all priorities. Getting wages from the state for this work, carers would help reshape all social relationships: reorganising work to incorporate men into caring and women into – everything.
Feminism largely chose the market. This enabled governments to demean rather than recognise caring. “Workless”, according to New Labour, mothers are now urged to “do the right thing” – go out to work irrespective of workload, childcare, the needs of those who depend on us.
Cuts in social services and public-sector jobs attack women – three-quarters of public employees. Government aims to push women into the private sector which pays – especially women – less and demands more. This lowers wages generally, imposing working conditions previously unthinkable. Already more families with adults in jobs are in poverty than families where adults are unemployed. When government says it wants “work to pay”, it means driving claimants below the lowest paid: from poverty to destitution, unable to refuse £1 or £2 an hour (many immigrants face this).
The market, which we are urged to love, honour and obey (Marx said it was a fetish), has corrupted all it touches, including the life of the planet. When recently a scientist warned of imminent destruction from climate change, we were told it would be “impractical” to try to stop it. Incredibly, the media did not gasp at this suicidal greed.
Many people say this is not the society they want to live in. But how can we confront all that needs changing?
First we must acknowledge the thousands already refusing hospital and library closures, cuts in benefits and legal aid, factory farming (concentration camps for animals), a poisonous food industry, toxic pharmaceuticals, media-police corruption, sale of playing fields, tax havens, warmongering, criminalisation of protest … Campaigns share one vital tenet: our entitlement to what we are struggling to reclaim.
Our problem is not only that we have allowed cuts – and perhaps the unkindest cut has been of the universality of child benefit, the money that recognises society’s responsibility for children. Our problem is that it has seemed foolish and impractical to dare to challenge the market when no major party is on our side.
With a three-way coalition against us, this has got to be a DIY job. On 1 May, International Workers’ Day, the Global Women’s Strike will launch the petition “Invest in a Caring Society: A living wage for mothers and other carers” – aiming to “redirect economic and social policies towards people and the planet and away from the uncaring market”. A challenge to the market by women, the carers, can only strengthen all those already fighting like hell.
The past week has been a particularly bad one for George Osborne and advocates of the Reinhart-Rogoff approach
Over the past week, a series of blows have been dealt to George Osborne’s reputation. First, the IMF’s chief economist warned that the chancellor’s austerity programme was “playing with fire”. Then the latest unemployment figures indicated that the jobs market may be about to turn significantly for the worse. The week ended with another credit rating agency stripping Britain of its AAA rating. While all this was going on, a row raged about academic research that had been cited by the chancellor in support of his austerity.
In 2010, the Harvard economists Carmen Reinhart and Ken Rogoff produced a paper arguing that countries with public debt above 90% of their annual income hit a tipping point, experiencing much lower growth. The study had been used by the Treasury as a key excuse for its spending cuts. Except that on closer examination by economists at the University of Massachusetts Amherst, the Reinhart-Rogoff research was found to be riddled with errors, from inappropriate weighting of the statistics to a howler over the use of an Excel spreadsheet. As if to rub in the schoolboy nature of some of these errors, the key researcher in the Massachusetts trio was a 28-year-old graduate student yet to complete his PhD.
It would be tempting to describe this as a terrible week for Mr Osborne, were it not for the fact that that phrase now seems to fit most weeks with a decent amount of economic news. Still, the past week has been particularly bad. The IMF is normally too respectful of diplomacy to take a stick to powerful member-states. And it is usually far too mindful of its own reputation to publicly repudiate a strategy that very recently commanded its emphatic support. Visiting London last summer, IMF boss Christine Lagarde gave even stronger support to the chancellor: “When I look back to 2010 and what could have happened without fiscal consolidation I shiver.” Not immaterial in all of this is that Ms Lagarde counts Mr Osborne as a friend: he was the first major finance minister to back her bid to be head of the IMF. In the course of just a few days, the chancellor has decisively lost one of his key personal and institutional allies. He must now prepare for a showdown next month when Fund economists visit London to make their annual inspection.
We can imagine just how embattled the government will be this summer. Take this coming week; it may be that the GDP figures on Thursday show that the UK has narrowly avoided a triple-dip recession – a result that would once have provided rhetorical ammo for the Treasury but will now be easily deflected by any TV interviewer toting a couple of choice quotes from the IMF. Then there will be next month’s local elections. And the setting of a spending review for June is bound to provoke months of mutinous muttering from ministers in charge of unprotected departments (see Vince Cable, Theresa May and Philip Hammond). But the events of the past week also show up the rottenness of our economic policymaking process. The Reinhart-Rogoff argument about a tipping point for debt was influential around the world. Yet the idea that there could be a natural cap for debt, which, when breached, would usher in sharply lower growth, is absurd.
Such mechanical explanations don’t fit with history: in 1945, Britain had debt of 220% of GDP but no economic disaster struck. Nor do they fit with commonsense: why should high debt produce low growth rather than, as is happening now, low growth lead to higher debt? Yet this study and others of similarly murky worth were cited by everyone from Paul Ryan to the austerity crowd in Brussels, and heeded by institutions such as the IMF. Put all this together, and a picture emerges of academics overselling a simplistic argument that is conducive to ministers’ yen for austerity and so gets further simplified for political purposes. The past week has dented Mr Osborne’s reputation; but it should be a chastening one for economic policymakers in Brussels, Frankfurt and Washington, too.
The Sunday Times’s annual naming of Britain’s wealthiest residents coincided with the running of the London Marathon
A YouGov poll suggests the recession has made Britain ripe for polarisation. The US can teach us why it should be avoided
If we Britons want to know what truly polarised politics look like, we need only glance across the Atlantic. Recent polling in the US asked respondents what they thought about repealing the 1975 Public Affairs Act, entirely fictitious legislation that – in two versions of the same question – it was suggested that either President Obama or the Republicans wanted to axe.
As Mick Blumenthal explains, a small proportion of voters are always willing to offer their views on subjects that they cannot possibly have any real opinion on, but as soon as the hate name Obama was mentioned in connection with the proposed repeal a full 39% of Republicans rushed forward to denounce it. More than a quarter of Democrats, likewise, rush to defend the non-act when it is said to be under Republican threat.
This sort of polarisation in the electoral base discourages politicians from reaching out across the partisan aisle, and ultimately leads to the sort of ludicrous stand-offs that now routinely mark every negotiation over America’s federal budget. More fundamentally, it spells trouble for a democracy when it loses the ability to debate issues on their merits, instead of warring over tribal lines. Despite the adversarial traditions of Westminster – where the benches are set two swords’ length apart – we should be thankful that on some really big issues, the Iraq war being one powerful example, the big divides in the country cut across party lines.
But the intriguing question raised by research prepared for a YouGov conference on Wednesday, at which the Guardian is media partner, is whether the selective sweep of the great recession and the cuts that follow it are doing for British public opinion what the culture wars did for American – namely, dividing the country into two tribes. As I report for the Guardian’s Society section, YouGov’s trans-national data demonstrates that the “social recession” – that is the anxiety and dislocation that comes with the slump – is hitting much more unequally in the Anglo-Saxon economies than in France and Germany. Those who report losing out financially in Britain’s recession are, it seems, finding life tougher in other respects too – and they are also developing different opinions.
At the start of the week, I reported that YouGov’s numbers suggested Britons are less inclined overall than the Germans or the French to demand that the government cracks down on people on benefit. The small print reveals that this surprising finding comes about because 57%of the country that reports suffering substantially from the recession personally is inclined to regard the government as being too harsh on the workless, by an eight point margin. Britons who report having largely escaped the slump, by contrast, incline by a double-digit margin to the view that the government ought to crack down on scroungers.
Parallel differences are found on questions about the role of government – the slump’s victims want it to do more redistribution – in resentment towards top pay (it’s more marked among those feeling the pinch) and in the faith that hard work can take poor children to the top, a faith that is weaker among those experiencing hard times. In none of the other countries surveyed did individuals’ personal experience of the great recession appear to have such a consistent bearing on so many attitudes.
We decided to explore in more detail how feelings about the cuts in Britain vary across the divide that separates those who are bearing their brunt, and those who are escaping. Those affected, for example, believe the cuts to be unfair by a crushing margin of 71% to 19%, as against a much smaller gap of 49% to 35% among the unaffected who believe that retrenchment is being meted out fairly. In the blame game, those feeling the cuts point the finger the coalition’s way, by 36% to 28%, whereas those who have escaped the effects insist by a 53%-17% margin that the responsibility goes back to Labour.
Some of the politicking that we have witnessed in recent weeks has been designed to exploit a pre-existing cuts chasm, although the new polling suggests that it may instead serve to widen it further. A notable example was George Osborne’s decision to link the case of Mick Philpott to the debate about benefit cuts. Although inevitably divisive, this controversial move won the backing of the public as a whole by 48% to 41%. Underneath those headline figures, however, we find that those who are feeling the cuts themselves felt that the chancellor had got it wrong by 49% to 43%, whereas those who are escaping the pain judged his intervention right by an emphatic 58% to 35% margin.
YouGov’s trove of research for Wednesday’s conference strongly suggests that the great recession renders British opinion ripe for exploitation by divisive political strategists. My message to the likes of Osborne, however, is to pause and glance across the Atlantic at the result. What starts out as a clever partisan wheeze eventually produces a politics that cannot get anything done.
• YouGov interviews were conducted online between 11 and 12 April, 2013, and total sample size was 1,982 British adults. The data has been weighted and the results are representative of all British adults aged 18 or over.
Our labour market looks more and more like The