Look to the Revisions!

As far as April is concerned, the jobs report is disappointing; 115,000 new jobs, just enough to keep pace with population growth. Unemployment dropped to 8.1 percent, but labor force participation also declined, which means that joblessness is lower because fewer people are searching for jobs.

What’s interesting is that this runs counter to a host of other economic indicators, all of which point to a brighter picture. According to Gallup, for example, economic confidence is a four-year high, consumer spending has edged up, and small-business optimism has risen to its highest levels since the summer of 2008.

Why is job growth so sluggish when the economy is looking brighter in other regards? The answer might lie with the revisions contained within the jobs report. Remember, this number isn’t particularly accurate; for almost every month of the last three years, it has been revised (usually upwards) after the fact. This time isn’t any different; according to the Bureau of Labor Statistics, 19,000 more jobs were created in February than they thought, bringing the total number to 259,000. Likewise, in March, 154,000 jobs were created—a revision of 34,000 fom the original report.

Indeed, the big picture is better than you might think; we’ve added 1.8 million private sector jobs in the last year and brought the unemployment rate down by a full percentage point. Job growth could be stronger—and the Federal Reserve, in particular, could do much more—but the United States is in recovery. The problem, simply put, is that it’s a weak one.

One last point—don’t get too caught up in the politics of this report. As Jonathan Bernstein recently wrote for the Washington Post:

It doesn’t matter who wins each individual news cycle over the economy. Instead, each economic report should be seen in the context of all the economic reports. And remember that economic data is subject to major revisions, often large enough to completely change the initial interpretation.

Voters aren’t paying attention to the minutae of each job report. Rather, they are using their own experience and media coverage to come to a conclusion about how the economy looks. And judging from President Obama’s rising approval ratings—according to Gallup’s tracking poll, he is in the high–40s/low–50s, Americans are likely more optimistic than we think.