Almost incredible labor market strength
The strength of the US labor market has not only defied expectations. There are suspicions that official statistics may be exaggerating employment growth.
When the government announces March employment statistics Questions about the reliability of the figures could resurface on Friday. Can the numbers be trusted?
The Bureau of Labor Statistics (BLS) reported that employment rose by 290,000 on a seasonally adjusted basis in December, 229,000 in January, and 275,000 in February. This results in 3 month moving average is 265,000a very high level of employment growth by historical standards.
of Econoday survey median forecast is 200,000 jobs, the number of responses ranges from 150,000 to 230,000. This is a relatively broad forecast, reflecting uncertainty about what is happening in the labor market. If the numbers come in line with expectations, the three-month average would drop to 234,000, which is high enough to show demand for workers remains strong.
So-called “Whisper number”The numbers traders are predicting rose slightly following this week’s announcement. Recruitment/turnover rate survey (JOLTS) and ADP Private Payroll Report. By most estimates, the market is probably looking at around 215,000 jobs.
A story of two job investigations.
People who are skeptical about recent employment statistics are paying attention to the following: big difference This emerges between two separate surveys that emerge from the BLS’s labyrinthine machinery to make up the monthly employment report. According to research, we are living in the best of times. According to others, it was the worst time.
One study was based on a questionnaire sent to approximately 119,000 businesses and government agencies. Establishment investigation. This huge data collection serves as the basis for evaluating monthly job growth in the United States, which is typically considered a key indicator of economic health.
In parallel, BLS will conduct a survey of approximately 60,000 households.this household budget survey is used to calculate the unemployment rate and provides a proxy estimate of employment that includes parts of the labor force, such as the self-employed, who may escape the gaze of establishment surveys.
According to a survey of business establishments, 2.7 million additional workers February salary change from previous year. The household budget survey shows that employment growth has stalled by half. Even more alarmingly, while the Establishment Survey showed that salaries increased by 1.4 million people in the six months to February, the Household Survey showed that 532,000 fewer jobs.
Those who believe that employment is overstated can point to a number of potential sources of error in establishment surveys. Response rates to the BLS survey have declined since the pandemic, and a number of significant revisions have been made as government bean counters collect additional data to fill gaps. Some analysts Birth/death adjustment The statistics used by the BLS are too generous and the official statistics are misleading. Additionally, facility data is not adjusted for multiple employers, so if someone takes her third job, this will show up as his third job. The Household Survey avoids this because it aggregates employment by simply asking whether someone is employed.
Adventure where you choose your job
It should be noted that there are many motivated reasoning The same goes for those who believe that household surveys more accurately reflect reality. And unlike the partisan politics behind many other disagreements over data, people on both ends of the political spectrum have an incentive to believe that the labor market is weaker than it appears.
Progressives have been Urge the Fed to lower interest rates They see a strong job market as a hindrance to that. Some conservatives are convinced that jobs cannot grow as quickly as Biden’s policies weigh on the economy. And some bitter Wall Street analysts decided it wasn’t their predictions that were wrong, but the misleading data.
Traders work on the floor of the New York Stock Exchange during afternoon trading on April 2, 2024 in New York City. (Michael M. Santiago/Getty Images)
The problem is, if the household budget survey tells the “true story” about the economy, we would already be in a recession. The employment collapse described there is too great to ignore. This will be seen in a decline in consumer spending, a sharp rise in claims for unemployment benefits, and stagnant or declining personal incomes. JOLTS is unlikely to show an opening much above pre-pandemic levels. Wage growth would have exceeded limits. GDP will stagnate. House prices will stall or fall.
Nothing like that is happening. The economy grew at 2.5% in the first three months of this year, according to the Atlanta Fed’s GDPNow. Wages and salary income increased by 0.8% in February, and increased by 5.6% compared to the same month last year. The opening is now ticking. Personal spending rose 0.8% last month and 4.9% for the year. Housing prices are rising.
The remaining economic data, viz. Supporting economic views from business surveys Not a household budget survey. This discrepancy is very likely due to sampling error in the latter, which will correct over time and allow more jobs to be obtained.
If discrepancies persist in Friday’s report, our approach is as follows: trust the facility–This is not something we usually say here.
