Tomorrow, the Trump administration gets one of its earliest official grades. The Labor Department will put out the first monthly jobs report with data collected entirely during his presidency.
If the number is good — and it’s expected to be — Trump will crow endlessly about it and take all the credit, as he’s been doing since well before he took office…
The U.S. Consumer Confidence Index for December surged nearly four points to 113.7, THE HIGHEST LEVEL IN MORE THAN 15 YEARS! Thanks Donald!
— Donald J. Trump (@realDonaldTrump) December 28, 2016
Thanks, me! But if it’s meh, expect him to claim Obama is stacking the numbers and then deride all the FAKE NEWS coverage. And for someone to leak how furious he is.
Either way, it’s important to understand how these numbers actually work and what they’ve looked like over time. So here are three key points of context…
1. There are two jobs reports
The largest American payroll service, ADP, releases a private-sector jobs report every month a few days before the official U.S. jobs report. It’s often seen as an early indicator of what the official numbers will look like, though they don’t always match up. Here’s what the numbers have looked like between the two throughout Obama’s tenure…
You can see the government report (BLS) and the private one (ADP) don’t always line up; especially coming out of the bottom of the recession in 2010, they hardly agreed at all. You can hover over a point for actual numbers.
There’s a month here and there of extreme disagreement, but if you look at just the past year, the reports are on average about 40,000 jobs apart. The new ADP report for February shows 298,000 new jobs, so I would guess the Bureau of Labor Statistics will come in around 260,000. Both are good numbers — the highest since last summer, and probably good enough for the Federal Reserve to raise interest rates again next week.
You can expect Trump to cite whichever report has the bigger number, and that tends to be ADP, although the government figure is the official snapshot you usually see cited outside of financial circles.
2. The margin of error is yuge
One thing to keep in mind with any jobs report is that even the people who make it don’t pretend it’s super reliable. There’s no perfect way to count how many jobs were added to the economy at any given time. People are constantly getting hired and fired and there’s no universal, timely way that gets reported.
The official BLS report admits the data is only good enough to predict the real number within 115,000 jobs — so if they say 260,000 jobs it means they’re about 90 percent sure it was between 145,000 and 375,000 jobs. Pretty huge range, and it means any given month could be completely wrong.
In fact, past months’ figures are frequently revised as new data comes in, and sometimes the swings are pretty big. The current January BLS report shows November was revised down to 164,000 from 204,000.
In short, a jobs number doesn’t mean anything until a few months after it’s posted — and even then, you can’t look at just one.
3. Expect an early boost on the promise of deregulation
Trump has promised his economic plan will add 25 million new jobs in the next decade, a number he’s confident enough to put on Whitehouse.gov. That plan involves “pro-growth tax reform” (including lower tax rates for everyone), renegotiating trade deals, and getting rid of many “job-killing regulations.”
Trump has already made moves to gut a number of regulations and the North American Free Trade Agreement. That excites many businesses, which can worry less about being sued or reined in by the federal government. They may set aside less money for taxes and potential fines and move to expand more aggressively than they would have under a Clinton administration.
It seems likely the first few months of the Trump administration will see a surge in new jobs, and then either fall back into the fairly steady growth pattern we’ve been following since 2012, or — hopefully not — start falling as Trump policies begin having a real impact on people.
There’s no question we’re moving into uncharted territory. But eventually, we’ll run out of regulations to tear up and taxes to cut and trade agreements to bully smaller countries on. What the impact will be is anybody’s guess, but hopefully there’s a plan beyond “get rid of everything.”
Only the trend matters
If you want to start counting toward Trump’s 25 million jobs, fine. If we begin from January, he’s at an estimated 487,000 jobs so far. That’s 1.948 percent of the way there, and if that rate is maintained for a whole decade, we’ll have 29.2 million new jobs. Goal met.
That, of course, requires giving Trump credit for two to six years where he won’t be president. And assumes he can maintain or beat the pace Obama has set coming out of the Great Recession.
Most likely, the heightened job gains this year are already a reflection of businesses pricing in Trump’s promises on taxes and deregulation, and that number will start to drop off. If he fails to deliver, or if the policies don’t have the impact he expects, it will drop far faster.
It’s also possible we’ll fall into another recession during Trump’s term. These things happen, regardless of who is president —both Bushes, Reagan, Carter, and Nixon oversaw economic decline.
But the way to judge Trump’s success isn’t whether he meets an arbitrary (and pretty unrealistic) number. It’s to look at the trend of job growth over time, just like the chart above does with Obama. Probably every six months is a reasonable time frame to evaluate his progress, but certainly not every time a jobs report comes out.
So whether Trump starts tooting his own horn or blaming Obama, you should just ignore him until the end of summer. That’s when everybody goes back to school, and the grades start counting.