The BLS New Year's Resolution: More Lou Costello Labor Math
Do NOT Take The Employment Summary At Face Value. It Is Not Even Remotely Credible
At this juncture, the monthly Bureau of Labor Statistics Employment Situation Summary has become so broken and so nonsensical as to render the headline numbers utterly useless as a weather gauge of American employment.
If you believe the numbers, the US economy added a whopping 353,000 jobs in January, after adding a revised 333,000 jobs in December.
Total nonfarm payroll employment rose by 353,000 in January, and the unemployment rate remained at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, retail trade, and social assistance. Employment declined in the mining, quarrying, and oil and gas extraction industry.
Corporate media and Wall Street dutifully accepted these numbers without question, as well as the usual wholesale revisions across the board in 2023, including a 54% increase in the December jobs total, from 216,000 to 333,000 jobs.
Jobs growth far outstripped economists’ expectations in January, the latest surprise delivered by a labor market that has repeatedly defied predictions of a significant slowdown.
Employers added a seasonally adjusted 353,000 jobs last month, the Labor Department reported Friday, the strongest in a year. December’s payroll gains were revised upward to 333,000 from 216,000, suggesting that higher interest rates haven’t cooled hiring as much as economists had previously thought.
The official estimate for January was only supposed to be around 185,000 jobs.
The US economy created 353,000 nonfarm payroll jobs in January, according to new data from the Bureau of Labor Statistics released Friday, more than the 185,000 expected by economists.
As the saying goes, when something sounds too good to be true, it probably isn’t. That should be the guiding logic when viewing the January jobs report.
Wall Street, of course, reacted favorably to the jobs report, with the Dow rising 0.4% on the day’s trading.
Treasury yields were a bit less understanding, rising on the day across the entire yield curve.
Overall, Wall Street reacted predictably to the jobs report, accepting the headline number at face value and accepting its conclusion that the jobs market in the US is starting off 2024 fairly red hot.
For his part, Dementia Joe’s handlers reliably took his monthly unearned victory lap tweet for the fake job numbers.
This alone should suffice as a clue that the numbers are not to be taken seriously, when the most unserious President since James Buchanan thinks they are real.
If one had only the headline jobs number from the Employment Situation Summary as a reference, one might be forgiven for thinking that labor markets in the US were doing extremely well in January. However, there is not just the headline jobs number, and were Wall Street to perform even a modest analysis of the rest of the data its acceptance of such a rosy outlook on the US jobs market would be far more problematic and skeptical than it is currently.
First and foremost, we must place the BLS Employment Situation Summary against the January ADP Employment Report, which arrived at a far more conservative estimate of January job growth.
Private sector employment increased by 107,000 jobs in January and annual pay was up 5.2 percent year-over-year, according to the January ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”). The ADP National Employment Report is an independent measure and high-frequency view of the private-sector labor market based on actual, anonymized payroll data of more than 25 million U.S. employees.
It is worth noting that the ADP report has consistently trended lower than the BLS report since August.
Additionally, except for December, the vast majority of month on month revisions and corrections to the BLS data has been a net reduction in jobs.
The ADP data itself is difficult to properly assess, as it tends to track closely in terms of relative growth to the BLS data.
However, the ADP job totals tend to run roughly 25,000 jobs below the BLS payroll data.
Immediately, we have an external reason to suspect the BLS data is more than a little overstated.
However, even within the Employment Situation Summary, we have reason to question the headline jobs number.
First and foremost, there is the December revision of 117,000 jobs to the upside, a far greater revision than has been seen in any single month in 2023 with the exception of the year end revision to the June data.
Large scale revisions to the data in a single period like that are automatically suspicious.
But we have other reasons to doubt (once again) the headline Establishment Survey number.
With the December revision, the past two months of Establishment Survey data show a surprising surge in employment.
However, the employment level figures from the Household Survey show a seasonally adjusted drop in employment for these same months.
Indeed, if we look at the indexed employment growth from both the Establishment and the Household Survey we still do not see, even after all the BLS revisions, any indication the Establishment Survey shows the plateaus in household employment during 2022 and again at the end of 2023.
Even so, the Establishment Survey data shows significant employment growth in service industries, although relatively little growth in other industries.
Yet the relative growth trends in government vs private employment are one sided but in the other direction. If we index job growth by sector to January 2023, the largest relative gains come from government employment.
Arguably, the growth trend in employment is in government jobs, and only less so in the private sector. This is not a recipe for economic expansion or economic prosperity.
Indeed, when we look at the unemployment figures themselves, we see similar unbalanced outcomes which do not augur well for the future of job markets in this country.
When we look at unemployment levels by reason of unemployment, we find people who have lost their job permanently to be exhibiting the largest relative growth trend over the the past year.
Since January, 2023, the number of unemployed in the US has risen by 7.1%, far outpacing the relative growth in either the labor force or the civilian non-institutional population.
Since January 2023, the greatest unemployment growth has been among people who are losing their job permanently—people who were not temporarily laid off or who quit, but who were involuntarily fired or otherwise dismissed.
Even more disconcerting is that, contrary to what the Federal Reserve has asserted in recent public statements, the age bracket 25-54 years of age has been showing a steady rise in unemployment since January of 2023.
In fact, in relative terms, unemployment has been rising for every age bracket except 20-24 year olds.
Rising unemployment and 353,000 new jobs? At a time when more than half the workers sidelined by the Pandemic Panic Recession are still on the sideines and not in the labor force?
That headline jobs number becomes even more questionable when we look at the more expansive definitions of unemployment and underemployment.
As we can see from the U-6 figure, which tracks unemployed individuals, marginally attached workers, and part-time workers for economic reasons, underemployment as well as unemployment is on the rise and has been since April 2023.
As a simple matter of basic math, there have not been in January enough workers pulled in from the cohort not in the labor force to account for the rise in unemployed, the rise in underemployed, and add 353,000 workers to payrolls. That is not a circle that can be squared.
This is, of course, becoming an annual rite of passage for the BLS. Their January “revisions” are simply too fantastical to be taken seriously at any level. This was the case last year at this time.
Last year, after a week or so for Wall Street to ruminate on the data, even the most beknighted “experts” realized that the numbers did not add up—although they generally stopped short of calling BS on the BLS.
Even last month’s jobs report should have sufficed as a guide to realize that the BLS January figures are simply not worth a tinker’s damn. There are too many “revisions”, too many reformulations and corrections, and too many statistically impossible combinations of data for the headline jobs number to be accepted as a realistic appraisal of employment in the United States.
353,000 jobs created in the month of January is a number that sounds far too good to be true. That’s because it almost certainly is not at all true.
Wall Street may not be willing to call BS on the BLS, but that is exactly the right response to the January jobs report. The numbers are simply garbage, and the projections being formed off of the Establishment Survey numbers in particular should not be considered to be at all reliable.
Talk about a “con job”, the American people are really getting one from the Biden administration!
The Durden Dispatch yesterday had an article entitled, “The Most Ridiculous Jobs Report in Recent History”, so you’re not the only analyst fuming at the nonsense. (Somehow, I’m not able to post a link to it; maybe only for paid subscribers).
Anyway, the positive takeaway in the ridiculous spin of the Authorities is that few average Americans are going to buy it. Remember, few people are brilliant analysts like yourself, and are just frantically trying to get through their day raising children, going to their jobs, trying to stay on top of problems. They don’t have the time or inclination to dig into jobs numbers. What they DO know is that the prices of food have climbed during the past four years, it’s become depressingly difficult to buy a house or a new car, and life in general has become harder. Their job no longer ‘feels’ as secure, and new career opportunities aren’t jumping into their view. Their gut feel at the voter booth is going to be, “yeah, I’m not better off”. So the BLS’s spin may backfire at election time.
I sure wish I had the connections to get your analysis here to important people like Trump. These kinds of fact-based critiques should be leveraged into political power - not to mention furtherance of the truth!