The May employment report showed that the economy added 157,000 jobs for the month, somewhat more than most economists (myself included) had expected. Given the weakness of the economy in the first quarter, and mostly weak data in the subsequent two months, this number should be viewed with some suspicion.
The most obvious cause of a problem is the Bureau of Labor Statistic's (BLS) imputation for job growth in new firms that are not included in the sample. This imputation is based on past growth and therefore will miss turning points in the economy, understating job growth during an upturn and overstating it in a downturn.
So, what the's story this time? BLS imputed 529,000 jobs into the establishment data in the first five months of 2006. It imputed 591,000 jobs, or 62,000 more in the first five months of 2007. The economy grew at a 5.6 percent rate in the first quarter of 2006. It grew at a 0.6 percent rate in the first quarter of 2007. It looks to me like they've overstated job growth in new firms this time around. Of course, the good news is that productivity growth is slightly better than the data indicate.
As always, you can get the story on the employment report from CEPR's jobs byte.
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