October surprise: September employment report flatters with BLS adjustment
Surprise, surprise. The September jobs report shows that employment increased by 254,000 people, but once again the real action seems to be in the footnotes, the magic in the concrete. seasonal adjustment.
Every year, government statisticians Bureau of Labor Statistics In particular, September has the unenviable task of smoothing out the turbulence in the labor market. History shows that the private sector almost always loses jobs before adjustments take effect.
Let's get down to business. Since the beginning of this century, The private sector cuts jobs every September-Excluding 2020, when there was a pandemic. On average this century, excluding 2020, U.S. employment would decline by 432,000 people, and by 405,000 jobs excluding 2020. This is not shocking. Children quit their summer jobs. Students return to school. Meanwhile, teachers are back in the classroom, often leaving their personal pay stubs behind with their general pay stubs.
these are well-known seasonal patterns. Our labor market is not breaking new ground here. The only new development is the surprising scale of this year's adjustment.
Without seasonal adjustment, Private sector employment plunged by 458,000 jobs in September. But when you add in these adjustments, voila, all of a sudden we're talking about an increase of 223,000. Thus, the seasonally adjusted increase in employment was 681,000, the third time this has occurred. September adjustment amount is the largest ever since 2019 and 2020.
Going back to 1948, September adjustments typically increased private sector employment by about 191,000 people on average. Why are recent numbers so high? The main factors are: The size of the workforce has expandedraises both the unadjusted and adjusted numbers.
Seasonal adjustment is therefore “supposed'' to explain predictable patterns such as summer unemployment. But what if fewer jobs are lost than usual? Suddenly, September looks like it will be a good month.
Elections and coordination: Partisan tilt.
It's only natural to wonder if politics plays a role. After all, September is more than just a month in an election year. It is typically Employment statistics for the most recent month before voters cast their votes About who gets the keys to the Oval Office. While cynics might expect seasonal adjustments to be larger in election years, the opposite is actually true. Since 1990, the seasonally adjusted average for September in election years is 443,000 and in non-election years it is 485,000.
What about partisanship? Since 1990, when a Democrat is in the White House in an election year, the average September adjustment jumps to 506,000. Under a Republican incumbent? Only 395,000 people. Since 2000, this partisan gap has widened further and the adjustment has evened out. 572,000 for Democratic incumbents and 465,000 for Republican incumbents..
Why does the disparity occur? It's not because BLS supports Democrats. Perhaps this is rooted in the nature of each political party's economic intervention. Democratic Party Trends Demand stimulation policy As we've seen recently, inflation can run out of control, but it also tends to cushion the seasonal job losses typically expected in months like September. However, the BLS operates on an established historical model and compensates for losses that were not fully realized. The adjustment is therefore a significant overcorrection, inflating the final number.
In contrast, Republican policies such as tax cuts, deregulation, and (at least in the Trump era) higher tariffs Long-term growth of the private sector However, it does not necessarily protect the economy from predictable seasonal downturns. Actual job losses have been consistent with history, with smaller seasonally adjusted amounts under Republican administrations, simply because the BLS has less to “fix.”
Government work in September is huge.
So does this mean the economy is much weaker than it appears? Not quite. Indeed, just as the upward revisions in the private sector were large, the downward revisions in public sector employment were even larger.
Government employment rose by 918,000 unadjustedAs educators and school staff return from summer vacation. After seasonal adjustment, this counts as just 31,000 jobs. Although these jobs do not reflect private sector demand for workers, employee spending increases private sector demand and therefore puts upward pressure on employment.
So, were there any surprises in October in the just-released September employment statistics? Only if you're surprised that it's been going on for decades.
