Do you believe the U.S. added 272,000 jobs last month? If not, you have plenty of company. The figure is so out of scale, and so at odds with other indicators of the employment picture, that it almost surely is wrong, and likely to be revised sharply lower.
After all, another Bureau of Labor Statistics report shows that 625,000 fewer people were employed full-time last month. When even Jay Powell, chairman of the Federal Reserve, suggests the numbers are somewhat bogus, distrust in the White House’s read on the economy — and the data used to back up their rosy claims — blossoms.
Of course, this is the same Jay Powell who, when asked by a reporter at a recent press conference why Americans were unhappy with the economy, answered “You know, I don’t think anyone knows, has a definitive answer why people are not as happy about the economy as they might be.” Here’s an insight for Mr. Powell, who really needs to get out more: Everything costs too much!
Before last week’s shockingly good jobs report, it surfaced that the government has been consistently exaggerating job additions, adding to pervasive skepticism that the all-important data is reliable. Job gains have now been revised down for 10 months in 2023, by a monthly average of 51,000. In some months the figures are radically different. In June 2023, for instance, instead of adding 209,000 jobs, as originally reported, it turns out the economy added only 105,000.
This year the overstatements have continued, as have the revisions. In January, the government reported that we had increased employment by 353,000; that was revised down to 256,000. February was marked down as well, though by a lesser amount (275,000 to 236,000).
The substantial reporting errors do not inspire confidence; last week’s jobs report raised more questions.
But the blockbuster employment number for May was a real shocker. Estimates hovered around 185,000; the reported number was 272,000, up from 165,000 in April; analysts are still arguing about what it means. There are plenty of people who don’t believe that top-line figure — including, it seems, Powell.
In his press conference announcing that the Fed would continue to hold interest rates steady, the chairman admitted about the employment data, “There’s an argument that they may be a bit overstated, but still, they’re strong. …We see gradual cooling, gradual moving toward better balance.”
In fact, the May report made no sense. It not only contradicted a number of indicators that the jobs market is, to use Powell’s word, “cooling,” it also was totally at odds with the household survey released by the Bureau of Labor Statistics (BLS) the very same day.
Each month the BLS reports a nonfarm payroll number that reports job losses and additions by industry. That “establishment” survey reflects input from 119,000 employers — about one-third of all payroll jobs, according to the Bureau — and is the source of the 272,000 jobs figure.
The BLS also publishes a survey of roughly 60,000 households. That survey produces the unemployment number that, despite supposedly strong job additions, actually ticked up to 4.0 percent in May from 3.9 percent in April, and 3.7 percent a year ago.
The household survey shows that 408,000 fewer people were employed in May than in the prior month. More people were working in May than a year ago, but compared to April, jobs are down.
How to make sense of this? The two main surveys do not always move in lockstep, but they are normally somewhat compatible. The divergence today is unusual.
One has to be skeptical of the blow-out 272,000 jobs supposedly added in May, well above the 12-month prior average of 232,000, due to numerous other indicators showing hiring trends weakening. First, the ADP report, which came out two days earlier, put job additions at 152,000, down from 188,000 the prior month. Next, the JOLTS report from the BLS has shown some decline in job availability. The latest read indicated that on the final business day of April, there were 8.1 million jobs available, down by 1.8 million from the year before. In April, hiring was roughly flat.
Elsewhere, the May survey from the National Federation of Independent Businesses (NFIB), which claims to speak for “over 40% of GDP and employment” showed only 15 percent of its members intended to hire new workers. That dismal tally was actually up from the prior month but is consistent with mounting anxiety over business prospects. The NFIB’s “uncertainty index” reached the highest level since November 2020.
Finally, the Federal Reserve’s Beige Book report in May summarized the employment situation from April to mid-May this way: “Employment rose at a slight pace overall. Eight Districts reported negligible to modest job gains, and the remaining four Districts reported no changes in employment.”
The jobs reports are always subject to substantial revisions, in part because the government has to estimate numerous factors including seasonal effects and the business birth/death impact on the labor market. But since the gurus at the Federal Reserve rely on the data to determine the course of interest rates and, in effect, the economy, that the numbers appear to be so out of whack is troubling.
It has also been troubling that President Joe Biden and his Democrat colleagues lie constantly and comfortably about how inflation was 9 percent when he took office and the economy was in free-fall, and about how he’s “created” 15 million jobs and 800,000 manufacturing jobs — none of which is true.
A recent poll shows that only 23 percent of Americans trust the government, down from 35 percent in 2022. A dishonest White House takes the blame, but having the economic bean counters issue confusing and unreliable data doesn’t help.
Liz Peek is a former partner of major bracket Wall Street firm Wertheim and Company.