Why You Should Take the Latest Jobs Report With a Grain of Salt
If you’re at all skeptical about the government’s narratives, you have to question last week’s payroll report from the Bureau of Labor Statistics. Given the number of layoffs and the general slowdown in the economy, the idea that 517,000 jobs were added in January makes no sense.
It turns out that your skepticism is justified.
As SchiffGold analyst Tony noted in his digit count overview, it may be time to drop the letter “L” from BLS.
How can you look at the environment and then take such a job report seriously? This is the kind of jobs report you would see at the peak of a business cycle when the economy is in overdrive. The BLS numbers are difficult to take at face value.”
Nevertheless, the media ran with the headlines and raved about the employment report. As Mises Institute’s Ryan McMaken pointed out, the words “wow” and “stunner” were used frequently. But like so many government numbers, you have to look a little deeper.
A recent article by market observation did just that, noting that there are five major reasons to believe the big January number was an anomaly and not a sign of a booming economy.
There is reason to believe that the January numbers, at least as far as payroll is concerned, were a one-off.”
As reported by market observationMorgan Stanley economists noted that three factors fueling job growth are likely to be transitory and misrepresent the state of the labor market.
- Unusually warm weather
- An end to the California college strike that is taking people off the unemployment list.
- A very strong upward seasonal adjustment.
The seasonal adjustments are interesting. Many companies lay off seasonal workers in January after the holiday season. The BLS compensates for this with seasonal adjustments that “smooth” employment data throughout the year. In fact, the BLS invents numbers to adjust the dates.
According to the Cato Institute, seasonally adjusted job growth of 517,000 jobs without seasonal adjustment translates to unadjusted job losses of 2,505,000 jobs.
The seasonal adjustment may be justified. Or maybe not. Remember, it’s a made up number.
Economist Mark Zandi tweeted his skepticism.
Wow! The BLS jobs report for January was VERY strong. So strong I don’t believe it. The BLS is probably having measurement problems. Most likely difficulties in seasonally adjusting the data, which is especially important in January. This January was the fifth warmest on record.
— Mark Zandi (@Markzandi) February 3, 2023
Economist Murray Rothbard explained why we should always be cautious when the government makes “adjustments” to the data.
The further one strays from the raw data, the further one strays from reality and therefore the more flawed any focus on that number. Seasonal data adjustments aren’t as benign as they seem, as seasonal patterns aren’t materialized even for products like fruits and vegetables. Seasonal patterns change, and they change in unpredictable ways, and so seasonal adjustments are likely to add additional bias to the data.”
There is another factor that few seem to talk about. Most of these new positions are part-time. McMaken notes that monthly full-time employment growth has been negative since September. Meanwhile, growth in part-time jobs has been positive.
A move from a full-time job to a part-time job usually indicates a recession is imminent. We saw it in 1981, 1990, 2001, 2008, 2020. Now it happened again in 2023.”
The fact that people are switching from full-time to part-time jobs and more and more people are taking on additional part-time jobs to make ends meet does not scream “strong economy”. In fact it’s the opposite. This reveals an economy with a rotting foundation.
Finally, market observation highlights a Philadelphia Federal Reserve report referred to as “The”. Quarterly Employment and Wage Census that casts more doubt on the BLS numbers. In short, the QCEW estimates that the BLS data overstated job creation by around 1 million in the second quarter.
Steve Englander, head of Standard Chartered’s North American macro strategy market observation He found the QCEW data “fairly reliable,” and his own analysis indicated that headline digits may have been overstated by as much as 1.1 million.
The bottom line is that you should probably take the headlines generated by the latest report on non-farm payrolls with a healthy dose of salt.
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