More Lou Costello Labor Math

It Works If You Just Don't Think

Thinking is clearly not the current regime’s forte.

How lacking in clue does one need to be to not realize that when even the fudged seasonally adjusted employment numbers from the June Employment Situation Summary are not encouraging, victory lap tweets are not the thing to do?

Total nonfarm payroll employment increased by 209,000 in June, and the unemployment rate changed little at 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in government, health care, social assistance, and construction.

This was less than half the number reported by ADP in their June National Employment Report.

Naturally, both the White House and the corporate media opted to ignore the discrepancy between the two employment measures.

However, the corporate media did have enough sense to catch the narrative drift of the lower jobs number.

The economy added 209,000 jobs in June, the Bureau of Labor Statistics reported Friday, reflecting a slowdown in the labor market as the Federal Reserve tightens its monetary policy.

The unemployment rate fell slightly to 3.6%, still a very low figure historically. Notably, last month’s job growth was the slowest for the U.S. since December 2020 after months of the economy outperforming the expectations of economists.

They also acknowledged that Wall Street’s “expert” class had predicted the jobs number would be much higher.

Economists surveyed by The Wall Street Journal estimate U.S. employers added 240,000 jobs in June, down from May’s gain of 339,000, but still capping a solid first half of 2023 for the labor market.

Wall Street at least anticipated a less-than-stellar jobs report. Apparently the jobs report was about where they expected it, as equity markets ended the day mostly where they began.

Overall, Wall Street’s response was mostly muted.

Not so Dementia Joe. His handlers were so ecstatic over the lowest jobs number in months they gave him not one but two clueless victory lap tweets over the jobs report.

Yes, the White House thinks its economic agenda is a success. Seriously.

What neither the White House nor the corporate media wanted to acknowledge, however, is the cognitive dissonance (aka Lou Costello Labor Math) needed to take the jobs report seriously.

Presumably, 209,000 jobs created with only 140,000 workers shifted out of the ranks of the unemployed reconciles with the addition of 50,000 workers to the cohort of those not currently in the labor force.

259,000 “should” have rotated out of unemployment, but only 140,000 were counted. This makes sense to the White House. Seriously.

At least the Household Survey numbers are internally consistent. Accounting for both population and labor force growth for the month, the Household Survey numbers do add up.

Inclusion of population and overall labor force numbers, however, only makes the jobs number from the Establishment Survey that much more irreconcilable.

Ironically, the Household Survey gives a more favorable jobs number at 273,000, although the news release from the Bureau of Labor Statistics routinely describes the seasonally adjusted change in total non-farm employees from the Establishment Survey first, and that is the figure that gets bandied about as the “jobs created” figure.

The Establishment Survey says 209,000 jobs were created by 273,000 people moving into the ranks of the employed. Those two numbers cannot be even somewhat accurate at the same time.

Moreover, the Establishment Survey numbers are actually worse than they first appear. The last paragraph of the Employment Situation Summary details the “revisions” to prior months—which wipes out just over half of the jobs reported in the Establishment Survey (emphasis mine).

The change in total nonfarm payroll employment for April was revised down by 77,000, from +294,000 to +217,000, and the change for May was revised down by 33,000, from +339,000 to +306,000. With these revisions, employment in April and May combined is 110,000 lower than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.)

209,000 jobs were created in June, but the BLS overcounted by 110,000 the number of jobs created in April and May. Effectively, after all the revisions are distributed, the net jobs number for June is only 99,000.

That is not a good number. Fortunately for the regime it’s a number corporate media either chooses to ignore or fails to understand (or both).

Yet even within the Establishment Survey, such as the data is, the trend that is being reported is not a good trend, jobwise. Employment gains have been diminishing since February 2022.

Even the Household Survey data shows a trend towards fewer jobs created each month.

With a marginal increasing trend for the “Not In Labor Force” demographic, this is not a comforting trend, even though there is also a downward trend since the beginning of 2022 for the number of unemployed.

The trends are more clearly seen if we index the data to January of 2022.

These are the overall trends since the beginning of 2022—before the Fed began its rate hikes: slowing employment growth, with some reduction in unemployment, with marginal increase in those dropping out of the labor force altogether.

The Fed might actually want these trends, as they are the sort of dysfunctional labor market the Fed thinks the US needs in order to bring inflation down.

Job Loss, Dead Ahead

Most people generally view there being fewer jobs as a bad thing. The Fed and the White House apparently think its a good thing; so does Wall Street. Which would you prefer?

Nor is the earnings outlook for workers all that rosy. While wages nominally increased again—and have been increasing nominally since before the COVID recession—inflation has been stalking paychecks since at least March of 2021.

May was the first month that inflation printed lower than increase in average hourly wage since March of 2021.

Yet even at that, growth in nominal weekly earnings is trending down, and as of May is still below the rate of inflation.

Thanks to inflation, workers are taking home less money and less ability to buy things.

Compounding the degree to which inflation is eating away workers payroll gains is the downward trend in hours worked.

The decline in hours worked is not a small number, either.

In January 2021, when the average hours worked was 35, the total size of private payrolls was 121,188,000—which equates to 4,241,580 man-hours per week. For June of 2023 the payroll size was 133,494,000, and the average hours worked per week was 34.4, giving man-hours per week of 4,592,193. At 35 hours per week per worker, the payroll size needed to generate 4,592,193 man hours per week is 131,205,514—a difference of 2,288,486 workers.

In other words, nearly 2.3 million of the 13.2 million jobs Dementia Joe claims as his doing are the result of spreading the same amount of work among more workers, and paying them less in the process.

A healthy labor market would see average hours per week per worker rise due to increased demand for labor. Declining hours per week per worker translates into less demand for labor. While the Fed might rejoice at having choked off people’s jobs and people’s paychecks, less demand is not anything to celebrate, nor celebrate with asinine tweets.

Of course, the Fed really can’t take credit for the decline, as it began a full year before it started goosing the federal funds rate.

That Dementia Joe’s handlers cannot grasp even that much of basic economics merely illustrates the degree of disconnect between the Washington Swamp and Main Street. That corporate media also fails to catch these subtle details is also illustrative of that disconnect, as well as the disconnect between Wall Street and Main Street.

We are now at a point where neither Washington nor Wall Street can look at the monthly Employment Situation Summary and accurately discern what it says about Main Street’s labor situation. We are also at a point where it is increasingly unlikely the Employment Situation Summary accurately conveys Main Street’s labor situation to anyone. Yet this report is presumably an essential data point for the Federal Reserve as well as other government bureaucracies and their decision making processes.

Don’t look for any logic, or even a method to this madness. There’s no real evidence of either—just the futzed and fudged numbers of Lou Costello Labor Math. That is a pretty scary thought all by itself.