Were the employment numbers released by the Bureau of Labor Statistics cooked? It's possible that seasonal adjustment factors had something to do with the gains. Why and how adjustment factors are adjusted, only the BLS insiders know for sure, but here's an interesting find by Ed Yardeni:
Â While I doubt that anyone at BLS tampered with the household data for political motives, Iâm certain no one even thought to bother with the payroll employment numbers. Septemberâs increase was a measly 114,000. I give much more weight to the revisions to the previous two months, which tend to be upwards when the economy is expanding. They totaled 86,000 during July and August, raising their monthly average gain to 161,500. The oddity here was that upward revisions occurred at the local-government level--mainly the hiring of school teachers (up 77,000)--which nearly matched the revision to overall payrolls.
Here's what I wrote in 2008 about the seasonal adjustment problem with teachers around this time of year:
As far as unemployment numbers, on September 7  we commented on the much weaker than expected payroll numbers released at the time:
An odd outlier was employment in local government education which fell by 32,000 in August, as seasonal hiring was less than usual. This unusual education jobs number accounted for approximately 30% of the difference between consensus forecasts and the actual payroll number. This would be the first time in history that a recession was led by summer school teachers!
Almost a month later, with the masses looking for the next distorted piece of government data, WSJ comments on the outlier we discussed on the day of the release:
Many economists suspect the drop in August payrolls was exaggerated by a fluky fall in local government payrolls, and new data from the Bureau of Labor Statistics supports that.
On Tuesday the BLS released state payroll data for August. If you sum up the changes across the 50 states and the District of Columbia, the total rose 159,000, compared to the decline of 4,000 in the national data.
That doesnât mean the national tally is wrong; sum-of-the-states data are hampered by differing response rates by states and the fact the BLS seasonally adjusts each state separately, notes Ray Stone of Stone&Â McCarthy Research Associates.
That said, he says the difference is unusually large. In part that may simply be catch-up, since the sum of the states total has lagged the national total for some time. But he says the principal source of divergence in August appears to be in government payrolls. The national tally of government jobs fell 28,000, while the sum-of-the-states tally rose 88,000.
Mr. Stone takes this as evidence that the national data have been distorted by quirky seasonal adjustment, which is made difficult by âthe timing issues.surrounding academic years, and the inconsistency in how teachers are paid over the summer. Some get paid on a 12-month basis, others on a 9- or 10- month basis. Any shift from year to year in the relative incidence of âmonths-paidâ will play havoc with the seasonally adjusted teacher payrolls.â Thus, this may explain the quirkiness in the payroll employment numbers. But what about the huge jump in the household data (different data than the payroll numbers)? Yardeni has this to say:
Â According to Septemberâs controversial household survey data, employment rose by a whopping 873,000, with the labor force up 418,000 and unemployment down 456,000. Monthly gains of 500,000 or more in household employment are rare, but there have been eleven of them in this volatile series since 2000. They are often followed by sharp reversals in the next monthly report.Â