The Real Jobs Report is Way Worse Than the Headline Suggests

SchiffGold US Debt Employment

Looking at the other data sheds light on the situation


Author

Affiliation

Exploring Finance

 

Published

Jan. 8, 2023

DOI


This article first appeared on SchiffGold.

Different Job Reports

Every month, the BLS releases two job reports. The Headline Report that gets all the attention is the Nonfarm Payroll Report. The second report which gets much less fanfare is the Household Survey. The plot below shows both reports.

As shown, the Household report had been significantly lower than the Headline Report going back to April of this year. December flipped that in a big way with the Household report showing 3.2x more jobs than the Headline Report (717k vs 223k).

December was the biggest deviation since October 2020. It cannot be explained by holiday hiring as last December saw the Household survey at 93% of the Headline Report.

Jul 2021Oct 2021Jan 2022Apr 2022Jul 2022Oct 2022Jan 2023−1M−0.5M00.5M1M−300.0%−200.0%−100.0%0.0%100.0%200.0%300.0%
Household SurveyBLS Headline ReportOI percentMonthly View of BLS Report vs Household SurveyChange in EmploymentHH Survey % of Headline Report

Figure 1: Primary Report vs Household Survey - Monthly

Even with the massive deviation in December, 2022 will be the biggest miss (70.2%) between the two reports since 2013 (63%). Typically, the Household Survey ranges from 85%-120% when compared to the Headline Report.

2010201220142016201820202022−5M05M−100.0%−50.0%0.0%50.0%100.0%
Household SurveyBLS Headline ReportOI percentAnnual View of BLS Report vs Household SurveyChange in EmploymentHH Survey % of Headline Report

Figure 2: Primary Report vs Household Survey - Annual

There is another report published by the BLS called the Quarterly Census of Employment and Wages (QECW). According to the BLS, this is a far more accurate and rigorous report covering 95% of jobs available at a highly detailed level. Due to the rigor, the report is released quarterly on a 7 month lag.

The data shown below is only updated through June of 2022. As can be seen, even in this report, 2022 is showing the widest deviation of any year back to 2010. The QECW shows job growth at 66% of the Headline Report. Even when filtering for the first 6 months of the year across all years (not shown), 2022 is the year where the Headline Report is overstating jobs by the largest amount.

2010201220142016201820202022−5M05M−100.0%−50.0%0.0%50.0%100.0%
QCEWBLS Unadjusted Headline ReportOI percentAnnual View of BLS Report vs QCEWChange in EmploymentQCEW % of Headline Report

Figure 3: Primary Report vs QCEW - Yearly

The BLS also publishes the data behind their Birth/Death assumptions. These are the jobs that the BLS assumes based on companies starting or closing. While the data is not seasonally adjusted, it directly impacts the Headline Report. The chart below shows the impact of Birth/Death jobs on the total number. While this year represented a modest 30%, up from 20% in 2021, the aggregate number is worth noting.

Prior to 2021, the Birth/Death assumptions were right around 1M. In 2021 and 2022, the assumptions surged 30% to over 1.34M in both years. Essentially, 700k jobs over the last 2 years were due to larger assumptions being made on top of baseline assumptions.

20142016201820202022−10M−5M05M10M−40.0%−20.0%0.0%20.0%40.0%
Birth/DeathsBLS Unadjusted Headline ReportOI percentAnnual View of BLS Report with Birth Death AssumptionsChange in EmploymentBirth/Death Assumptions % of Headline Report4.1M2.7M2.2M2.3M2.3M2M6.7M4.4M-9.2M-9.2M

Figure 4: Primary Unadjusted Report With Birth Death Assumptions - Annual

Looking at the quarterly Birth/Death data, shows that 41% of Q3 jobs were made up of the Birth/Death assumptions. Q4 saw 26.4% of jobs come from the Birth/Death assumptions which was 413k jobs.

Given the recessionary environment, these are very generous assumptions. Considering the data from the Household Survey and QECW, makes it very likely these assumptions are just plain wrong.

Jan 2020Jul 2020Jan 2021Jul 2021Jan 2022Jul 2022Jan 2023−10M−5M05M10M−40.0%−20.0%0.0%20.0%40.0%
Birth/DeathsBLS Headline ReportOI percentAnnual View of BLS Report with Birth Death AssumptionsChange in EmploymentBirth/Death Assumptions % of Headline Report

Figure 5: Primary Unadjusted Report With Birth Death Assumptions - Quarterly

Even though we just spent a few paragraphs and 5 charts showing how the BLS Headline Report is not very reliable… that is what the market takes as gospel. This is also what the Fed uses in shaping monetary policy, thus it is still important to understand the data, even if it’s probably wrong.

The US Economy added 223k jobs in December as the Unemployment rate fell to 3.5% and the Labor Force Participation rate increased to 62.3% from 62.2%.

Jul 2021Oct 2021Jan 2022Apr 2022Jul 2022Oct 20220200k400k600k3.5%4.0%4.5%5.0%5.5%6.0%
ConstructionEducation HealthGovernmentLeisure HospitalityManufacturingOtherProf BusinessTrade Trans UtilsUnemployment RateUS Employment Change by SectorChange in EmploymentUnemployment Rate557689517424677647588504714398368386293537292269263256223

Figure 6: Change by sector

When looking at the data for multiple job holders, we can see that the number surged from 7.68M to 8.05M. Some quick math shows that 370k jobs were directly a result of multiple job holders.

Let’s subtract this from the 223k, carry the 1… oh wait… the jobs report would have been -147k if not for 370k second jobs being created! If that isn’t the sign of a healthy economy, I don’t know what is (sarcasm).

20162017201820192020202120225.5M6M6.5M7M7.5M8M8.5M4.0%4.2%4.4%4.6%4.8%5.0%5.2%
Total Multiple Job HoldersMultiple Jobholders percentage of employedUS Employment Multiple Job HoldersTotal Multiple JobholdersPercentage of Employed

Figure 7: Multiple Full Time Employees

If we poke the report a little harder, we can see that the raw numbers were -244k. This means the raw numbers were adjusted up by 467k. Looking historically, this is the biggest December adjustment up going back to at least 2010.

201220142016201820202022−400k−200k0200k400k600k
Adjusted EmploymentUnadjusted EmploymentTotal AdjustmentDecember Historical Adjustment ReviewChange in Employment

Figure 8: YoY Adjusted vs Non-Adjusted

Breaking Down the Adjusted Numbers

Even with the massive adjustment up, the jobs report was still weak. 7 of the 8 trends came in below the 12 month average.

ConstructionEducation HealthGovernmentLeisure HospitalityManufacturingOtherProf BusinessTrade Trans Utils020k40k60k80k
Current Month12 Month Avg ChangeUS Employment TrendChange in Employment

Figure 9: Current vs TTM

The table below shows a detailed breakdown of the numbers.

Key takeaways:

What it means for Gold and Silver

As we unpack the labor report, we can see that the actual employment situation is much weaker than the Headline Reports have been suggesting. This is not conspiracy; this conclusion can be reached using the numbers provided by the BLS!

The Household Survey has been weaker, the QECW data has been weaker, we are seeing record jobs created through assumptions in the Birth/Death model, and December just saw the largest adjustment up from non-seasonally adjusted to seasonally adjusted.

The underlying weakness in the data is getting missed by the mainstream and even the Fed. Everyone focuses on the Headline Report. When the weakness is finally seen by everyone, it will be far too late to do anything about it. You can bet that the Fed will try though with a hard and fast pivot. The gold market seems to already be pricing this in, racing out of the gates to start the year and closing out the week above $1860.

It’s still not too late to get on the train before it leaves the station… but that train is picking up speed!


Data Source: https://fred.stlouisfed.org/series/PAYEMS and also series CIVPART

Data Updated: Monthly on first Friday of the month

Last Updated: Dec 2022

Interactive charts and graphs can always be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/USDebt/