More Evidence of Labor Market Weakness
Now the Federal Reserve Bank of Philadelphia is chiming in
On the heels of our post from two weeks ago, detailing how new data show last year’s job growth was wildly overestimated, the Federal Reserve Bank of Philadelphia did their own analysis. And they agree.
Once a quarter, the Philly Fed publishes an early benchmark revision. This basically predicts what the annual benchmark revision from the Bureau of Labor Statistics (BLS) will eventually show. Shock of shocks: it’s a BIG downward revision.
The monthly payroll numbers for the last quarter of 2023 were already revised down in subsequent monthly reports, but still showed payrolls growing by 637,000. That’s an annualized rate of 1.6 percent.
State-level data, however, are showing a significantly slower growth rate of 1.2 percent. While 0.4 percent sounds like a small difference, consider that it’s a quarter of the national growth rate, meaning one in four jobs that were supposedly added never existed.
But the Philly Fed’s estimate is way lower than even that. The early benchmark shows an annualized growth rate for payrolls of just 0.3 percent for the last three months of 2023.
That means the monthly job reports for October, November, and December collectively overestimated job growth by more than 500,000.
Over half a million jobs that were supposedly added, never existed. And they wonder why people are so down on the economy…?
This is just one of the pieces to the puzzle that is the mismatch between “official” data and how folks feel about their financial situations and the national economic conditions.
But it’s a big piece. There are lots of individuals markets in which a particular person doesn’t participate, but virtually EVERYONE is in the labor market—and the market’s not good. But these days, it’s taking longer than normal for the truth to come out.
While payroll data are revised twice in the months following an initial estimate, that’s not the last word on the subject. The data are subject to further revision in an annual benchmarking process.
Subsequent years can see even more changes as seasonal adjustment factors evolve over time. What prevents all of these revisions from producing radical up or down changes is the fact that the revisions follow a random walk.
In other words, one month is revised up, the next down, maybe a couple up, then a couple down—you get the picture.
The seasonal adjustments themselves are designed to zero-out in this way. Over the course of any 12-month period, the upward revisions will match the downward revisions. This is why annual changes are approximately the same whether looking at seasonally adjusted or non-seasonally adjusted data.
Since the seasonal adjustments are subject to change each year as conditions change, the numbers don’t always line up perfectly, but they’re close.
The key here is that when everything is working properly, adjustments and revisions balance themselves out in the long run.
The last couple of years have seen exactly the opposite happen: revisions and adjustments are consistently down—and by a lot.
The Philly Fed data indicate that when BLS finally get around to their next annual benchmark revision, the downward pattern will continue. And yes, it is a pattern, and that’s a problem.
For well over a year now, partisan voices on the right have been decrying Biden’s BLS as cooking the books for their boss. As time has gone on, an increasing number of nonpartisan voices are joining the criticism of the government bean counters.
To be crystal clear: there is no empirical evidence that anyone at BLS has purposely changed anything to produce favorable numbers for Biden et al. Rather, the evidence points to blatantly obvious problems with different methodologies used and assumptions made by BLS.
You can call it political hackery if you want, or just sheer laziness, but it doesn’t really matter what anyone’s motivation is at the end of the day in terms of whether the numbers are accurate or not. What we care about is getting statistics that accurately reflect the economic reality so that we can plan and invest successfully.
That’s being short-circuited today. The consumer sentiment survey from University of Michigan just plummeted again for June, falling well below the level of the covid lockdowns and nearly to the lows from 2023. Simultaneously, we’re told that jobs are up, inflation is down, and consumers have plenty of money to spend.
We call BS.
At the very least, here are three undoubtable truths about what’s going on at BLS:
There are serious problems with the monthly payroll estimates
The problems are obvious and if nonexperts outside of BLS can see them, so too can the statisticians within the organization
BLS has chosen to do nothing about it
Now, you can assign whatever motive you want to #3, but we’re leaving that alone—not because we don’t have our own opinions, but because it doesn’t change the numbers.
Until the problems with the monthly payroll numbers are resolved, we’ll keep publishing our scrutinization of them because we want you to be informed.
At the end of the day, artificially inflated statistics won’t put food on the table, increase the corporate bottom line, or make a company meet its earnings forecast. That’s why we bring you the unvarnished truth instead.
None of these truths about overstated numbers will prevent President Scheissen-Hosen from shouting his campaign lies about "the greatest economy since Bill Clinton". Facts? Dems don' need no stinkin' facts.
The BLS is a political office, created from the Sulzer Bill, sponsored by a Tammany Hall Democrat (who was impeached after 10 months in office as governor of NY), former Congressman William Sulzer. Organized labor has long been tied with international communists and, like communism, always treated laborers as disposable. (The so-called dictatorship of the proletariat has always been a dictatorship of the elite.) Communists and politicians in general cannot be believed in anything they say.