The labor market has been one of the bright spots of the US economy over the past year. As the housing and manufacturing sectors slip into recession and debt becomes the bane of consumers’ existence again, market analysts and economists can always count on impressive employment growth in the United States. But is this a superficial assessment of the jobs arena, or is it in great shape? It depends on what data is being studied and what conclusions are being made. So, let’s take a look at some metrics.
Out of Work in Today’s Labor Market?
According to the Department of Labor, the number of Americans filing for first-time unemployment benefits surged to 225,000 for the week ending Dec. 24. This was up from 216,000 in the previous week and matched expectations. The four-week average, which eliminates week-to-week volatility, was unchanged at 221,000. But here is the kicker: Continuing jobless claims advanced to an 11-month high of 1.71 million, up from 1.669 million and well over forecasts of 1.686 million.
Since March, when the Federal Reserve initiated its demand-killing tightening campaign, initial jobless claims have been on the rise, increasing by about 50,000. While there was a considerable decline in the middle of the summer – going from 260,000 to below 200,000 – the weekly measurement spotlighted a crack forming in the US labor market.
But this DOL figure might not provide concrete evidence of long-term movement. Therefore, it may be essential to comb through other gauges to determine the health of America’s employment situation.
Digging Through Data
The November jobs report surprised everyone again, recording 263,000 new positions and coming in higher than the consensus of 200,000, according to the Bureau of Labor Statistics (BLS). Job growth has been exceptional all year, but the downward trend in 2022 suggests it is unsustainable. Whatever the case, investors have not been pleased with the numbers since they would encourage the Eccles Building to stay the course of this monetary policy cycle. Suffice it to say, good news is bad news – and vice versa.
Here is a question: Are the BLS labor market figures accurate? When you monitor other data and notice deteriorating conditions, something is rotten in the corridors of the number crunchers in Washington. One source of concern in the monthly report is the issue of overcounting, which even garnered the attention of Sen. Rick Scott (R-FL), who demanded answers regarding the BLS’ inaccurate job estimates.
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Liberty Nation has touched upon this subject multiple times since the summer. The establishment component of the jobs report, which surveys businesses, has highlighted significant gains. However, the household counterpart revealed little employment growth. The divergence was so immense that the Fed Bank of Philadelphia even looked at the statistics and concluded that, between March and June, employment gains were overcounted by more than 1.1 million. The regional central bank recently stated: “In the aggregate, 10,500 net new jobs were added during the period rather than the 1,121,500 jobs estimated by the sum of the states; the U.S. CES [Current Employment Survey] estimated net growth of 1,047,000 jobs for the period.”
Double counting is another feature that might raise some eyebrows. Today, approximately 7.7 million Americans are working two or more jobs. Once again, the gap between the establishment and household surveys enters the equation and becomes paramount. The former will classify every extra job a person has as another payroll, while the latter will not.
And then there is the variety of other data points.
Markets pay close attention to the monthly ADP Employment Report, which calculates employment growth in the private sector. There was a noticeable gap between what the BLS and payroll processor reported in November: 136,000. Manufacturing was a good illustration of the discrepancy. The US government noted 14,000 new jobs, while ADP confirmed 100,000 lost positions.
Or, as another example, US-based employers announced nearly 77,000 job cuts in November, the highest since January 2021. This was up from the 33,835 in October. The tech sector accounted for close to 53,000 of these cuts, followed by consumer products (4,176), health care (2,985), and construction (2,612). In the first 11 months of 2022, employers announced plans to slash more than 320,000 jobs from their payrolls, up 6% from the same period a year ago.
Does this mean Washington bureaucrats are purposely fudging the numbers? Perhaps, but this is something that has happened before. The unemployment rate is an exhibit of how the nation’s capital routinely adjusts something to make itself look good. The official jobless rate is an incredible 3.7%. However, the U-6 real unemployment rate, which includes the underemployed, discouraged, part-time, and marginally attached workers, is closer to 8%.
Will the Labor Market Crack in 2023?
It has been said that the National Bureau of Economic Research (NBER) refrained from declaring an official recession in the first half of 2022 because the US economy added nearly 2.7 million jobs. But now that there is evidence that these might be phony numbers, it would be reasonable to have this discussion again. That said, whether it is the purchasing managers’ indexes (PMIs) or anything but the non-farm payrolls (NFPs), it is highly probable that 2023 will not emulate 2022. This might change if Democrats embark upon another crusade of redefining terms comparable to the definitions of recessions and women.
