Monthly Job Reports 'Worthless' for Long-Term Planning Says Top Official
Best way to build budget forecast, argue experts, is to focus on long-term trends and other economic indicators
As lawmakers start putting the finishing touches on a new budget for the coming fiscal year, they face the challenge of predicting where the state economy will perform over those 12 months. A number of sources can help them make that decision, including monthly job reports.
But a top Christie administration official is warning them this year not to put too much stock -- or even any stock at all -- in those monthly job numbers, which have been up-and-down for much of the year so far.
“All I can say is, the monthly numbers are worthless. And that’s not an exaggeration,” said Harold Wirths, commissioner of the state Department of Labor, during a recent Assembly Budget Committee hearing.
Other economists and financial experts quietly echo the thrust of Wirths’ more outspoken comments, noting that the monthly reports are based on preliminary data and routinely subject to revision. Instead, they say focus on long-term trends and other economic indicators.
It seems both the administration and the Legislature’s nonpartisan revenue forecasters are doing just that. With a new budget due by the end of the month, they are holding firm to projections for modest economic growth over the next 12 months.
And that comes even as a lackluster unemployment report released by the federal government on Friday has raised some new concerns, and on the heels of last month’s announcement of a revenue shortfall after the Christie administration overshot its projections for the current fiscal year by roughly $600 million.
Lawmakers have had good reason to be concerned about the state’s up-and-down economic performance this year as they’ve been evaluating Christie’s now $34.5 billion fiscal 2017 budget proposal.
If Democrats who control the Legislature believe the forecasts for modest growth will turn out right, they won’t need to come up with anyto go beyond those announced last month by Christie in response to the shortfall.
But if they turn out wrong, that could bring on difficult last-minute cuts this time next year, since the state constitution requires a balanced budget. For example, it was a miss of more than $1 billion in 2014 that brought onto planned state contributions to the public-employee pension system.
Wirths, during the budget committee hearing, was pressed by lawmakers to explain months like March, when the monthly report showed the addition of about 20,000 jobs, and April, when the report showed 7,500 jobs were lost. And those losses followed others reported in both January and February. He didn’t hold back in his response, telling lawmakers he’s learned a lot about viewing monthly job numbers since taking office in 2010.
“The monthly numbers, I wouldn’t put much stock in them,” Wirths said.
New Jersey’s economic outlook still remains solid, with nearly 64,000 jobs added in roughly the last year, he said. Those additions have also come as the pool of jobseekers has increased, suggesting more people are getting into the job market to look for work.
Wirths also said since the monthly numbers are subject to revision, lawmakers should be focusing instead on those broader trends as the look toward the future. He also stressed the importance of “benchmark” figures that come out each year, which give analysts a chance to further review initial data.
James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University and director of the Rutgers Regional Report, also urged restraint when viewing monthly job numbers, which are based on surveys that have some margin for error.
The new federal figures, which showed the addition of 38,000 jobs last month, were viewed by many as disappointing because even as the nation added jobs and the unemployment rate ticked down to 4.7 percent, that job growth was much smaller than most economists expected.
But the numbers were likely impacted by ainvolving Verizon and thousands of its unionized workers, Hughes said.
He also pointed to other data, including unemployment claims and job-opening reports, that suggest better economic health.
“I think the rule would be not to overreact if you get a bad month,” Hughes said. At the New Jersey Business and Industry Association, the monthly numbers are followed closely, but with an appropriate dose of caution, said Michele Siekerka, the organization’s president. She warned against making “kneejerk” reactions in response to just one month’s figures, saying data from “three, four, five or even six months” is more meaningful.
“We look at them carefully, knowing they are subject to change,” she said.
Yet Christie has at times this year been highlighting new job data, including in March when the state’s unemployment rate was at 4.3 percent. And he’s been attributing the state’s overall improvement to his own push to hold the line on taxes and reduce regulation.
“We need to reduce taxes more for the people and the businesses of this state,” Christie told reporters during a late-March news conference.
But as New Jersey’s unemployment rate has now gone up to 4.7 percent, some have questioned whether the governor has cherry-picked good unemployment numbers this year to make points about his economic policies. They note in past years, when New Jersey’s unemployment rate was much higher, he downplayed the importance of looking only at the monthly unemployment rate, especially during months that showed the state was gaining thousands of new jobs.
Christie spokesman Brian Murray said the governor has remained consistent on the issue by continuously highlighting the long-term trends.
“Gov. Christie has consistently pointed to the long-term federal data showing the number of private-sector jobs climbing in New Jersey as the unemployment rate has plummeted during his tenure,” Murray said.
He also defended Christie’sback in August 2009 of then-incumbent Democrat Jon Corzine as the nation slipped into a deep and painful recession. New Jersey gained jobs that month -- something Corzine promoted as a success -- even as the unemployment rate ticked up to 9.3 percent.
"I don't know how when unemployment continues to go up that you can say that's a success. That shows the low standards the governor has set for economic success in the state," Christie said in August 2009. He went on to beat Corzine that November, setting the stage for two terms in office.
Asked whether it was fair to not give Corzine the same the benefit of the doubt given the nature of the revisions and benchmarking that Wirths recently stressed to lawmakers, Murray said the revised numbers for 2009 ultimately proved just as unflattering for Corzine.
“It was a two-year period when the unemployment rate more than doubled and, by the time Gov. Christie took office, private-sector employment had dropped by about 250,000 jobs,” Murray said.