What to Look for in This Week’s Jobs Report: El-Erian

The monthly U.S. jobs report — scheduled to be released Friday — will inevitably attract a lot of market attention, economic reporting and political commentary. Allow me to pile on pre-emptively with four pointers:

1. Pay more attention to the details than to the headline numbers.

Consistent with past behavior, markets will focus on the monthly change in nonfarm payrolls and the unemployment rate, with immediate reactions depending in large part on whether consensus estimates — currently 215,000 for net new jobs and a slight decline in the unemployment rate to 6.6% — are validated. Yet as popular as these numbers are, their information content is not as good as it used to be, and no longer commensurate with how they are treated.

Policy makers — particularly at the Federal Reserve, which is shifting to a more holistic assessment of the labor market — will focus more on the details of the report. Two metrics are notable: long-term unemployment and the “U6″ unemployment measure, which captures part-time joblessness and those who want work but aren’t actively searching for it. Both have remained at stubbornly high levels. As of March, some 3.7 million people, or 36% of the unemployed, had been out of work for more than six months. U6 unemployment stood at 12.7%.

2. If you must focus on the headline numbers, remember some important qualifiers.

To reinforce America’s economic recovery, monthly job creation needs to be spread broadly across sectors (and, in particular, not concentrated in the sectors most affected by bad weather in previous months). More important, the unemployment rate — which counts only people who are actively looking for work — shouldn’t reflect a further decline in the measured labor force. At 63.2%, the share of the population in the labor force is still hovering near its lowest point in more than three decades.

3. Don’t expect the Fed to change course based on one month’s data.