Could the Rosy Jobs Numbers Be a False Spring?
Meg Handley

Some experts say an unseasonably warm winter could be skewing employment numbers

After several months of encouraging jobs reports, one might be tempted to get a little comfy and think the job-creating cogs of the country's economic engine might finally be getting a little grease.

After all, both January and February's jobs report showed employment gains upwards of 200,000 jobs, a far cry from the dismal numbers seen in the latter part of 2011.

But that's just the problem, according to some experts. The employment picture in the early months of 2012 is looking a lot like it did a year ago, and many of the same characteristics -- high gas prices and unrest in the Middle East -- are present as well.

Is the country in for a hard landing when March and April's employment figures come out? It's too soon to say, says Guy LeBas, chief fixed-income strategist at financial-services firm Janney Montgomery Scott, but there's certainly concern among economists that the budding optimism for a stronger jobs recovery in 2012 could be short-lived.

Surprisingly, the good weather is partly to blame. An unseasonably warm winter, particularly in the Northeast, may be masking some of the underlying weakness that still remains in the labor market, LeBas warns.

"Normally to make one month['s data] comparable to the next, most economic data are adjusted," LeBas says. "In the winter for employment, [the seasonal adjustment] adjusts up the reported jobs numbers."

The problem arises when the typical winter "push-down" effect of more lay-offs and fewer available jobs doesn't happen (like this year), which means the seasonal adjustment might overcompensate for what's really going on in the jobs market.

"You've got a construction worker and for 2012 it's been unusually warm so that construction worker has not been laid off as is typical in the winter," LeBas adds. "If you don't have a winter push-down effect and you're adjusting [the numbers] up, you're exaggerating the underlying fundamentals."

Economists can't be sure this is actually happening, but March employment numbers, due out in April, should give a clearer picture. "It isn't that we think employment is going to fall off a cliff in April, it's that we don't have enough confidence to say we are in a self-sustaining employment recovery," LeBas says.

LeBas predicts unemployment to drop to around 7.8 percent by the end of the year -- better than the 8.3 percent rate of February, but still high by most measures.

So what happens if 2012 does become a re-run of 2011? Nothing good, really. Financial markets will most likely have a heart attack, or as LeBas describes it "a large correction" if economic conditions deteriorate rapidly.

Twitter: @ihavenet

Could the Rosy Jobs Numbers Be a False Spring? | Politics

Copyright © 2012 Tribune Media Services