Over the past few decades, these pages and in some of the commentary I have offered elsewhere has been somewhat harsh analyzing the data emanating from the Bureau of Labor Statistics (BLS) and the various bits of information they release each month.
This past Friday the Employment Situation Summary from the BLS was released with a strong headline number indicated 353,000 jobs were created in January. This despite reports indicating massive layoffs in January in the service, technology, and manufacturing sectors as reported in the pages of MacroEdge on a daily basis.
The requirement to suspend belief is buried within the methodology and reality. For example, revisions to the 2023 headline reports was proudly touted in the ESS this past week as demonstrated within this chart below:
If anyone truly believes that over 100,000 people were added to the workforce in December of 2023 per the revisions published by the BLS in the chart above, one must ask themselves the following questions:
- December is basically a two business week month for employers. Thus any hiring would be for only necessary replacement personnel and not a net gain.
- Decembers in general are year end periods where bonus calculations are made and adding additional headcount is frowned upon in almost all businesses heading into the new year.
- Due to the three major holidays, Hanukah, Christmas, and New Years, most employers are winding down HR activity as there usually is a lack of personnel to provide training, orientation, etc.
Yet the BLS would have everyone believe that in the first two weeks of the month over 100 thousand jobs were added due to their statistical calculations? Hardly.
Next up with this current report is another anomaly which stands out like a sore thumb. The BLS insists that the Business Birth/Death model is a reliable statistical indicator for measuring employment activity. Thus when this author reviewed the following, let’s just say I had some questions:
So if we added 115,000 new jobs over the original published numbers but the Birth Death model indicated a loss of 86,000 jobs, then this means that the real number of “new” jobs created was over 200,000 jobs. Which makes the numbers in December 2023 and January 2024 even more unbelievable.
To understand why there should be some doubts in the data being produced by the US government one has to review the methodology. The Current Employment Situation (CES) report relies on 629-666,000 employers answering a survey. Of that the average returned completed surveys averages around 129,000; roughly a 20% return rate. This means that hundreds of billions of dollars on “jobs day” are wagered on 20% of the employers honestly filing and returning these surveys.
Good luck with that.
Add in some historical perspective and one has to start asking even more questions about the viability of the jobs report as a measure of America’s economic health.
For example, from the 2016 CES National Benchmark Article, the following footnote (2) appears:
A review of industries for the possible presence of noncovered employment in benchmark 2011 yielded 13 additional industries. As a result of including these industries, employment for total nonfarm was 95,000 more than the originally published March 2011 estimate level. The difference between the benchmarked and published March 2011 estimate level was 162,000. For this table, the 95,000 amount was added to the original published total nonfarm and total private March 2011 estimates before calculating the percent and level differences. Similarly, for the financial activities and education and health services supersectors, this table displays March 2011 data after incorporating the employment from the additional industries.
If one thinks this is unusual, think again. The BLS and politicians know that nobody reads the footnotes. Period. End of conversation. “New industries” and classifications are created adding employment to the total then revised away years later as “better” methodologies are developed. It’s the nature of statistics, but in reality, it also provides a wee bit of political insight into how the data is manipulated.
For example, let’s look at the chart from the 2012 CES National Benchmark Article:
Why would this author think that highlighting the two years in particular is important?
1. The Obama administration needed to show positive employment growth after two tough years of recovery from the GFC. The race against the Republicans was going to be a tough one and the Democrats truly feared losing total control of all the Executive and Legislative branches of government.
2. The Bureau of Economic Analysis (BEA) conveniently created new measures of GDP which resulted in outsized, okay, outright fictitious indicators of a budding economic expansion as soon as 2010 that moved even faster thanks to Obamanomics.
Every politician since that era, yes that includes Trump, has learned to overwhelm the masses with headline data, revise it closer to reality in the future, then blame the bureaucracy if something breaks.
The charts do not lie, as I demonstrate in this review of benchmark revisions below.
With an initial downward revision for 2023, the sudden surge for this past month’s report makes no sense. Until one reviews a calendar and understands that this is an election year.
Hence if one is making investment decisions for their own accounts based on government data, be it employment, inflation, national debt, or even trade, I wish them the best of luck. Everything eventually will be revised away and vanish from the headlines; just like the stock certificate at the top of this article.