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I have recently become aware that the jobs report as publicized is highly misleading. The number that is always talked about is the one resulting from the *business* poll. but there is a second poll of *households.* Recently, the household poll has been way out of sync with the business poll. For more than three months, the household poll has been reporting more than three times the job growth in comparison to the business poll!

How can this happen, you say? Well, speaking now as somebody who analyzes data for a living, I know that when you do sampling you have to have some model that allows you to extrapolate from the sample to the population. If you do random sampling, then that's just a multiplicative factor, and you're done. That's a pretty good description of the household poll (not quite, but good enough for our purposes). The business poll, though, has to be extrapolated using a model that tries to take into account the relative size of businesses, the fraction of businesses of a given type, etc., etc. It's a complex model, sort of like what's used in the interpretation of exit polling. And just as the latter can be badly off when voter behavior or turnout patterns differ dramatically from what's expected, the business poll could be badly off if the economic conditions have changed markedly, causing substantial changes in hiring patterns.

And, let's see, we've just been through one of the biggest economic dislocations in nearly a century. You think hiring patterns "might" have changed a bit? I think it's almost a given. And the fact that the household survey is showing a far higher rate of job growth says to me that we're all basing our attitude about the economy on a false picture of what is going on. That picture will get corrected as the months go on--and when it does folks are going to be "surprised" by the growth in jobs numbers. (And by the way, it's also known that the business poll tends to under-report, at least somewhat, the job growth in a recovery. For exactly the reason given above. I'm just saying the current situation is an extreme example of that tendency.)

I don't think it's a surprise. I think it's already happening, right there in the data, but the report that's being written up in the media is just missing the boat. Badly. And this means that we could be heading for a big upside surprise as this realization hits the investment community.

I'd be curious to hear others' opinions.
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