Federal Jobs Report Slices Total Jobs in New Revision
Ryan McMaken for Mises.org. 08/21/2024
The Bureau of Labor Statistics (BLS) today issued a major downward revision in total employment, telling us what more savvy observers of the federal jobs data already knew. Namely, that the employment situation isn’t nearly as strong as the federal establishment survey says it is.
The establishment survey is the employment survey that looks at total jobs—whether full time or part time—and not at total employed people.
So, that’s the report that’s being revised here, and it’s the biggest downward revision since 2009 when the economy was in bad shape during the Great Recession. It’s the second largest downward revision on record.
This is for the year ending in March 2024, and specifically, the BLS has reduced the total jobs numbers for the period by 818,000 jobs. For context for this number, we can keep in mind, that since late 2022, total monthly jobs growth numbers ranged from about 150,000 up to about 300,000.
So, by cutting 818,000 off the top, what the BLS is saying is that about four months of job growth as reported in 2023 and early 2024, never actually happened.
That is, through that period, as the media repeatedly told us about “blowout” jobs reports, those were phantom jobs that didn’t exist.
Or put another way, the average monthly jobs increase over the past year was revised downward from 218,000 to 150,000. That’s a decline of more than 31 percent.
Of course, we already knew recent jobs reports—as far as the establishment survey is concerned, was based largely on made up numbers.
For one, a lot of the alleged job growth was based on the fiction of the so-called birth-death model. This is a model used by the number crunchers at the BLS to simply make up estimates for how many jobs are being created at imagined new businesses. These numbers are not based on any actual surveys at all. In some months, that made-up number of new jobs totaled up to hundreds of thousands of jobs. In May 2024, for example, the BLS added 231,000 hypothetical jobs to the total through this model.
So, it’s no shock that on subsequent revisions, it turns out a lot of the job growth in those blowout jobs reports was imaginary.
Some jobs totals were actually revised upward in this report, though. Government jobs, it turns out, were underreported during the period. So the BLs has revised those taxpayer funded jobs up by 1,000 while cutting private sector job growth.
These revisions are only surprising, though, if we never bothered to look beyond the establishment survey. But, for anyone who takes the trouble to look beyond the establishment survey. For months now, it’s been apparent in other jobs data that the employment situation is in trouble. The household survey, for example, tells us more about employed persons than simply total jobs. And what that report has shown us since September of last year is that total growth in employed persons has flatlined. There has NOT been any growth in employed workers in 11 months. Moreover, most of that has been in part-time employment. That is, it stands to reason that workers who do have jobs are increasingly making ends meet by working two or more jobs.
So, it turns out the amazingly strong economy of Bidenomics was greatly overstated, and there is likely more bad news on the horizon.
Absolutely no one should be surprised! BLS has not had a correct report in recent memory. Add to this is the fact a majority of jobs are going to immigrants and it is an abysmal situation.
There’s something wrong with previous U.S. jobs reports.
The government quietly erased 439,000 jobs through November 2023, a closer look at the numbers from the Bureau of Labor Statistics shows.
That means its initial jobs results were inflated by 439,000 positions, and the job market is not as healthy as the government suggests.
Since the government wiped out 439,000 jobs after the fact, the total percentage of jobs created by the government last year is even higher.
This matters because U.S. jobs reports move the markets and U.S. Treasury yields. Plus, they are a significant factor in the Federal Reserve’s decisions about the path of interest rate hikes and cuts. All that affects U.S. consumers’ pocketbooks.
“Time to stop trading off the payroll data,” tweeted David Rosenberg, founder of Rosenberg Research Associates. By his calculations, he says the downward revisions came to “an epic 443,000,” adding,
Again, the government sector in December ranked high in job creation. It created 52,000 jobs in the final month of 2023. As FOX Business’s Edward Lawrence points out, that brings the three-month average of jobs created by the government sector to 50,000 per month. Lawrence says Acting Labor Secretary Julie Su “would not answer if this is sustainable when I pressed her.”
The health care and social assistance sector, which relies heavily on money from government spending, created about 59,000 jobs.
The problem of overstated jobs numbers is not a new one.
In August 2023, the BLS issued a preliminary revision for the 12 months through March 2023 showing U.S. job growth for that period was overstated by a net 306,000 jobs. That’s 25,500 fewer jobs on average per month in that period.
Private sector job creation also was adjusted lower by 358,000 in that period, while government payrolls were revised by an increase of 52,000.
The Philadelphia Federal Reserve Bank in December 2022 also raised eyebrows when its algorithms predicted the BLS had overreported jobs growth by 1.1 million in the second quarter of that year.
The president, too, has been accused of taking too much credit for the job numbers. He claimed he created 13 million to 14 million jobs. But economists and market analysts have pointed out those were jobs the U.S. economy clawed back after pandemic shutdowns erased 22 million jobs.
In reality, the economy under President Biden “added back” all the jobs lost in the pandemic and has “created” 4.86 million jobs since February 2020. That’s a ho-hum result.
Plus, the economy “added back” all the manufacturing jobs lost in the pandemic and “created” 201,000 manufacturing jobs. Just 6,000 were created in December 2023.
Manufacturing jobs are highly important. They create a halo effect for other sectors, be it in the service industry or health care. The manufacturing sector has been in contraction for 14 straight months.
Today, U.S. labor force participation is at a historically low 62.5%.
As Edward Lawrence reports, the December jobs report shows 683,000 workers dropped out of the labor force. A record high 8.69 million people now hold multiple jobs to make ends meet. The economy lost 1.5 million full-time workers since June of last year, while adding 796,000 part-time workers.
That means more workers are holding down multiple jobs to pay for a higher cost of living due to a cumulative 17.4% inflation rate under this White House.
The personal savings rate is near seventeen-year lows. Credit card debt is at record levels. Millions of prime-age workers have quit the job market, and full-time employment continues to wither. On the other hand, the Biden Administration wants you to think things have never been better.
Last week, following the release of December’s jobs data by the Bureau of Labor Statistics, Biden crowed that “Real wages are up in recent months … and we are seeing welcome signs that inflation is coming down as well.” Biden concluded by saying “it’s a good time to be a worker in America.”
Unfortunately, things aren’t nearly as good as the White House and its accomplices in the corporate media would have us believe.
It’s only a “good time” to be a worker in America if one equates falling real wages and falling full-time employment with “robust” employment conditions.
Moreover, the numbers that the administration continued to cherry-pick to burnish its political image are themselves quite suspect. Response rates to employment surveys sent out by the BLS have gone into steep decline, and the Philadelphia Federal Reserve has recently accused the BLS of vastly overstating employment growth in 2022.
A more sober look at broader economic trends continues to point toward economic pain in 2023, and there is less reason than ever to think that the Federal Reserve will engineer a fabled “soft landing” for the economy after years of record-breaking monetary inflation.
Falling Real Wages, Falling Full-Time Employment
In spite of what Biden may say, real wages in the United States fell, year-over-year from April 2021 to November 2022. That’s likely to also be the case for December once we get the inflation growth numbers for December. Put another way, wages are falling in real terms because the inflation rate has been outpacing wage growth during all that time. Nominal wage growth actually slowed in December according to the new BLS numbers, so unless the inflation rate suddenly collapsed to below 4.5 percent in December—which is unlikely—we will find that real wages fell in December for the twenty-first month in a row.
Specifically, full-time employees dropped by 1,000 workers while part-time workers rose by 679,000 (month-over-month). The total gain in all workers for the period was 717,000. Moreover, the overall trend since 2021 is one in which growth in full-time work in general is falling—and turning negative in some months—while part-time employment represents most of the growth.
What does this mean overall? David Rosenberg summed it up in a recent tweet, these are jobs “gains” characterized by part-timers, side giggers, and multiple job holders:
An important aspect of the “household survey” Rosenberg mentions is that it considers part-time workers and barely-employed self-employed people as among the “employed” on a par with full-time workers. Yet, when we consider the reality of slowing wages combined with a lack of growth in full-time workers, one suspects that the employment situation isn’t exactly lucrative for a great many workers. There is also good reason to believe that many workers who are now taking on part-time work are doing so because the cost of living has increased substantially. For example, over the past year, the average hourly wage increased 4.6 percent while CPI prices rose 6.4 percent. Workers are falling behind, and it’s hard to square this with Biden’s claim that workers are doing unusually well.
Stagnant Labor Force Participation
Another reason to suspect the labor market isn’t as great as we’re being told is the fact that total prime-age (i.e., age 25-49) workers are hardly flocking to join the labor force. People leaving the work force could be a sign of a very robust economy, of course, as people can scale back working hours when real wages surge. But its extremely unlikely that’s what’s happening in our current period of rising costs, falling wages, and rising debt.
In fact, the number of prime-age workers “not in the labor force” is still up from where it was before the covid panic of 2020. In January 2020, about 21.3 million workers labeled themselves “not in the labor force.” That is, these people reported not working for market income at all during the previous year. As of December, the number had risen to 22.2 million. Since the Great Recession began in late 2007, the number of workers not in the labor force is up by more than a million. Biden may think it’s a great time to be a worker in America, but apparently many prime-age workers don’t agree.
This all reflect a larger historical trend in which workforce participation has fallen, with men especially prone to leaving the work force. This all helps to push down the unemployment rate as the pool of potential unemployed workers continues to shrink.
“Jobs” vs. Employed People
But why is it that we keep hearing about how there is so much job growth? Those “good” numbers are based mostly on a separate job survey which looks only at the number of jobs created, as opposed to the number of employed persons. This means a large number of part-time jobs could be created, with few new employed persons, and this could be reported as robust job growth. In fact, in terms of cumulative employment growth since January 2021, we find a persistent gap between the two surveys. This gap narrowed in December 2022, but, as noted above, this was mostly driven by part-time work. In every month since April 2022, this unexplained gap between employed persons and “new jobs” has ranged from 96,000 up to 1.8 million:
This gap could theoretically be explained by a rising number of multiple job holders, but it seems this need not explain all of the gap, as it seems the establishment survey has been overestimating job growth considerably. According to a new report released by the Philadelphia Federal Reserve the total number of new jobs added during the second quarter was closer to 11,000 than the 1.1 million that the establishment survey had shown. This doesn’t tell us much about the second half of the year, of course, but it does suggests there’s something very wrong with the survey that’s been repeatedly used to “prove” the job market is excellent.
The iffy numbers might have something to do with declining response rates to the BLS’s surveys. Since the covid panic, the surveys used to collect this data have seen sizable drops in response rates. The establishment survey (CES) response rate has fallen from 59 percent in early 2020 to 45 percent today. The “JOLTS” survey, which produces many rosy estimates about job openings, has fallen to a 30-percent response rate since 2020. In contrast, the Household Survey (CPS) still has a response rate over 70 percent.
Without parsing the data sources, it’s impossible to guess how much the establishment survey’s narrowing data sources are affecting the numbers. In any case, the establishment survey is increasingly delivering estimates that appear questionable given larger economic indicators. The “good” employment data still leaves us wondering why the savings rate is falling and why disposable income is below trend. Why is credit card debt mounting if households are enjoying the fruits of a “strong” labor market?
The writers of Biden’s press releases offer us no answers. Once we take a broader view, however, the numbers point to recession and declining fortunes for a great many of America’s workers. In November, the money supply actually fell, continuing a trend of rapidly falling money-supply growth. That’s a strong recession signal. An even more reliable recession signal is the yield curve showing the 3-month/10-year yield spread. When this goes negative, a recession has been assured in every case for decades. This spread is now the deepest in negative territory it’s been in more than 40 years.
Misplaced Trust in the Federal Reserve
At this point, Wall Street and the regime are both banking on the hope that the Federal Reserve will engineer a “soft landing” through its monetary policy. The idea here is that the Fed will somehow figure out how to allow interest rates to rise just the perfect amount to rein in inflation while also not triggering a recession. This is hope based on fantasies, however. It’s entirely possible a recession may somehow be averted this year or next, but if that occurs, we hardly have any reason to assume the Federal Reserve planned it all. After all, the Fed has made it abundantly clear in the past two years that it has absolutely no special insights when it comes to economic trends or how monetary inflation will affect the economy. After record breaking amounts of monetary inflation in 2020 and 2021, Fed economists were still insisting that price inflation would be no problem and would be “transitory.” Numerous Fed economists from Neel Kashkari to Jerome Powell continued to state that the Fed should keep interest rates low well into 2022, or even into 2023.
By the end of 2021, however, it was clear the Fed has been very wrong about price inflation and was forced to raise rates and promise monetary tightening. Now, they continue to insist they can do so without triggering a recession. The Fed also continued to insist it has no data predicting a recession. This is just par for the course for the Fed which has always predicted good economic times even when the country is in recession. Ben Bernanke, for example, was still denying there would be any recession at all in 2008, even after the US had been in recession for months.
In other words, the Fed is winging it, and the data points to both anemic jobs data and a stagnating economy. The Fed has given us every reason to believe it doesn’t even know what’s going on, and we certainly should not assume it has a secret plan to assure a robust economy into the future
