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Based On JOLTS And ADP, Expect More Lou Costello Labor Math From The BS BLS
The Details Do Not Support The Headlines
November's Job Opening and Labor Turnover Summary reported little change in the levels of job openings, hires, or separations.
The number of job openings was little changed at 10.5 million on the last business day of November, the U.S. Bureau of Labor Statistics reported today. Over the month, the number of hires and total separations changed little at 6.1 million and 5.9 million, respectively. Within separations, quits (4.2 million) and layoffs and discharges (1.4 million) changed little. This release includes estimates of the number and rate of job openings, hires, and separations for the total nonfarm sector, by industry, and by establishment size class.
This was a stronger report than financial market analysts had expected, leading stock markets to trend down on the news, fearful of what the Fed will do with the “strong” jobs data signaled by the JOLTS report as well as ADP’s December National Employment Report.
Stocks dropped as the ADP private payrolls report showed employers added 235,000 jobs in December, above analyst estimates. Wages also grew faster than estimates. Government data also showed that weekly jobless claims came in below expectations, falling to their lowest level since September and dealing another blow to investors hoping for a less hawkish Fed.
The news follows yesterday’s November Job Openings and Labor Turnover report, or JOLTS, which also came in stronger than expected.
For its part, ADP’s December NER showed the US adding a total of 235,000 jobs in December.
Private sector employment increased by 235,000 jobs in December and annual pay was up 7.3 percent year-over-year, according to the December ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”).
The markets are wise to be concerned about the Fed’s likely response, as the reality of the underlying data once again tells a dramatically different story.
While the month on month changes have been relatively small, there is still a discernible trend in the hiring data, and it is not the upward trend of market strengthening, but the downward trend of market softening.
If we index the job openings, hirings, and separations data to January of 2021, we can see the downward trend quite clearly, beginning in February of this year.
The February peak is intriguing, because the following month is when employment as per the Household Survey portion of the BLS’ Employment Situation Summary plateaued, showing little gain since.
The hiring trend thus is very much in line with the stagnating employment situation signaled by the Household Survey numbers.
Moreover, while the jobs market arguably is “tight”, it is only that way because of growing dissatisfaction among workers with employment in general. Quits are still outpacing Layoffs and Discharges by a significant margin.
This “Great Resignation” trend has been growing steadily since late 2012, interrupted only by the upheavals of 2020. The degree to which Quits have exceeded Layoffs and Discharges in 2022 is the largest margin since the data began to be collected in 2000.
Additionally, the figures put forward for job openings must once again be understood as essentially fictitious. The claimed openings practically speaking do not exist. If there were serious efforts to recruit individuals to fill a number of positions, we would see a significant uptick in overall hiring, which is not shown at all in the data.
When the job openings, hires, and separations data is indexed to December of 2000 (oldest data points in the set), we can see that hiring growth in this country has changed very little since 2000, while job openings have skyrocketed since the ending of the pandemic-induced recession. When claimed job openings do not result in additional hiring and reduced separations, for all intents and purposes the job openings might as well not exist.
This is the backdrop against which we have to evaluate the ADP National Employment Report for December. While the 235,000 jobs added in December certainly looks like a strong figure, it is a seasonally adjusted number. According to the raw data there were 744,000 jobs lost during December.
This is not in and of itself that remarkable, as the structure of the ADP NER shows the seasonally adjusted data smoothing out a very strong seasonal fluctuation in overall employment.
The summer months tend to overstate employment in the NER, and the winter months tend to understate it.
December is one of the “correction” months where the adjusted and non-adjusted data more or less converge, as overstatement flips to understatement. It is this convergence that calls our attention to the raw data—this is the first December is a few years where the non-adjusted and adjusted data have been significantly far apart.
Viewed another way, this month’s raw-data decline in employment recalls a similar decline in December 2020, when the unadjusted employment figure dropped 886,000.
The Household Survey’s Employment Level numbers in that same period reflected anemic growth relative to the summers of both 2020 and 2021.
The signal in the NER is not one of strength but of stagnation and even decline. The data is showing the labor markets in this country to be anything but strong.
That was proven when the Philadelphia Fed called the BLS on the carpet by showing how, despite strong jobs figures being reported on the Employment Situation Summary, barely 10,000 jobs were created during the second quarter of the year.
Last fall’s near miss with a national rail strike fruther demonstrated how fragile the labor situation in this country truly is.
With both the underlying JOLTS and ADP data signalling employment stagnation, in order for the upcoming December Employment Situation Summary to produce any “strong” numbers, another application of the lunacy of Lou Costello Labor Math will be required.
The government and the corporate media have a choice to make: analyze the data honestly and report the data accurately, or massage a nice headline number using vaudevillian mathematics to continue the fiction of a strong jobs market.
I doubt either will choose the path of honesty.