Do I get to say I told you so? My advance estimate a month ago was 779,000 lower. Bloomberg estimated 730,000.
Major Downward Revisions to US Jobs Pushes the Fed to Act
ING reports Downward Revisions to US Jobs Pushes the Fed to Act
The Bureau for Labor Statistics has acknowledged that its non-farm payrolls estimates were above the levels shown by tax records to the tune of 818,000. So rather than adding 2.9mn jobs in the 12M to March 2024, there were only 2.1mn new jobs. This means labour market momentum is being lost from a weaker position than originally thought
After quite a bit of delay and confusion we have finally got the preliminary benchmark revisions to US non-farm payrolls – where the Bureau for Labor Statistics (BLS) adjusts its estimates for non-farm payrolls to reflect official tax data – the true benchmark for US employment. It is a chunky 818k, meaning that rather than 2.9mn jobs added in the 12M to March 2024, it was “only” 2.1mn – equivalent to a 0.5 percentage point error on payrolls. So rather than averaging monthly payrolls gains of 246,000 it was only 178,000.
Historically, the BLS has been out by 0.1pp with its estimates versus the tax data – that is the 10Y average. Last year they were out by 0.2pp, requiring a 306k downward revision so today’s announced change is a big error and suggests there are some clear issues regarding some of the assumptions the BLS uses to complement its surveys of US businesses. The BLS has a good handle on what is going on amongst large employers, but has less visibility on the small business sector and has a “births-death” model.
That is what I said a month ago. My estimate was 779,000. Anna Wong at Bloomberg estimated 730,000.
On July 26, 2024 I commented Expect the BLS to Revise Job Growth Down by 730,000 in 2023, More This Year
Apologies for being overly optimistic.
I am struggling to match 818,000 this morning. Using unadjusted numbers, I calculate a discrepancy of 915,000.
QCEW Minus Nonfarm Payrolls Year-Over-Year
It’s very clear what’s happening.
The BLS models went haywire after Covid. First the BLS understated jobs and now the BLS is dramatically overstating them.
Jobs up by over 2 million from a year ago might look good. But I guarantee you it won’t stick.
Revisions are increasingly negative across the board and will stay that way.
Thought of the Day
68k downward revision per month on average. (My estimate is higher). This means that productivity will be revised up while unit labor costs will be revised down.
Personal income and Gross Domestic Income will be revised downward and the personal saving rate will be reduced from its already very depressed level of 3.5 percent.
We should remember that the markets traded on this faulty data. The downward revision is confirmation that the birth/death model, which imputes the gain in jobs for small firms, is not working.
Improving the McKelvey Recession Indicator, No False Negative or Positive Signals
Yesterday, I commented Improving the McKelvey Recession Indicator, No False Negative or Positive Signals
Adding the job vacancy rate to the McKelvey (Claudia Sahm) recession signal eliminates false negatives and false positives, and provides a much faster signal than Sahm.
I note that since 1953, every time the economy was in the current state, the economy was in recession.
That does not make the odds 100 percent because everything is up to the NBER, the official arbiter of recessions.
My recession post is on the complicated side, but please check it out.
The recent revision by the Bureau of Labor Statistics (BLS) that showed a downward adjustment of 818,000 jobs over a 12-month period is indeed significant. While such revisions are not uncommon, this scale is unprecedented and raises important questions about the accuracy and reliability of initial job reports. The revision suggests that the labor market might not have been as strong as previously thought, which could have implications for economic policy and the perception of economic health.
For those following labor market trends globally, it’s interesting to compare these revisions with other countries’ job markets. For example, Malta’s minimum wage structure offers insights into how smaller economies manage wage growth and employment rates. <a href=”http://themaltasalarycalculator.com/blog/malta-minimum-wage”>You can learn more about Malta’s minimum wage in this article</a>.
a big yawn.
3/2024 -818K, -0.5%
3/2023 -187K, -0.1%
3/2022 +506K, +0.3%
3/2021 -7K, 0%
3/2020 -121K, -0.1%
3/2019 -489K, -0.3%
3/2018 -16K, 0%
Yes, the model is flawed. It’s time for a new one. Mish mentioned that one based on unique social security numbers would more accurately report those with multiple part time jobs as a single person employed instead of multiple people with one job.
When Uncle Sam is spending close to $2T a year extra or about 40% more than they take in, I think it safe to say that nobody’s model(s) will accurately predict the arrival of a recession.
Did I read somewhere that the “official” numbers won’t be adjusted until early 2025? If so, boy isn’t that convenient for Harris-Waltz.
Might also discover that a lot of SSNs have been … repurposed …
Gen alpha is the smallest generation since the 1930’s. They are 30 million short
of the boomers. Covid eliminated 2 million people within two weeks instead of 30 years. Labor shortages ==> higher wages.
The participation rate (at 62.7%) is in a trading range for a year and a half, since Mar 2023. When 3,000,000 Obama/Kamala/Hakeem new housing units will be built in US suburbia payroll will rise. Ten million new immigrants will own them partially in exchange for labor as down payment and D donors, plus mortgage.
Don’t want to carry burdens for illegals, free everything, when we don’t know whom to trust. The homes are in the backyards of citizen homeowners who own properties with taxes $12,000 to $20,000 and illegals don’t pay those costs. So Dems make believe construction is surging while citizens are paying the bill. How does that work. Illegals have new cars, furniture, medical, entertainment, food, clothing, all snap benefits on our backs. And they can vote. Dems should just buy Venezuela and leaving the rest of the working class to keep monies in their pockets.
Even WHO could see this coming.
Since April 2022, Real Retail Sales have been on a glide path into Biden International. Warning! Altitude lost!
consider home depot and lowes’s guiding lower on future performance. There is no disposable income for home renovations, or appliance purchases etc..
there are no jobs. no good long term jobs that would inspire debt with a good likelyhood of payback in a reasonable period of time.
this would jibe with employment data…
Trump also had an adjustment downward of 500k.
As noted, a revision of 0.5% is normal: Each year, the Current Employment Statistics (CES) survey employment estimates are benchmarked to comprehensive counts of employment for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. For National CES employment series, the annual benchmark revisions over the last 10 years have averaged plus or minus one-tenth of one percent of total nonfarm employment. The preliminary estimate of the benchmark revision indicates an adjustment to March 2024 total nonfarm employment of -818,000 (-0.5 percent).
Sorry but a 0.5 revision is NOT normal
The White House supervises all the bean counters in the Fed Govt. When Joe finally relented and gave up his hopes of a 2nd term, and Kamala didnt blow up the country, it was then ok to put some “real” numbers out there so the invented numbers didnt end up flying off on a tangeant. Its all about “conflict of interest” as I mentioned a while back. When you do counts that make your boss look good or not so good, you massage the numbers.
Hope through love. Love through cap gains.
Mish
Does this pretty much resolve the discrepancy between the household survey and the payroll numbers.
It goes a long way of proving nonfarm payrolls are trash.
I would need to crunch some number. But the problem is the BLS makes all of these revisions, one time, poof here you go.
That means historical reports will be garbage even with the revisions.
All I can say is wow! But it sure matches what I have been seeing here in Los Angeles
Re “ Do I get to say I told you so?”
Yep!
And the strong negative revisions are an additional recession indicator.
To understate during Trump and overstate during Biden smells like political manipulation of data that should be sacrosanct.
Unfortunately, Mish has not thoroughly examined the birth/death model over time, and therefore it is impossible to know whether the establishment numbers undercounted during Trump’s term.
The Birth Death model tends to be very wrong at turns. That I have always said, I did crunch the numbers recently though..
https://mishtalk.com/economics/expect-the-bls-to-revise-job-growth-down-by-730000-in-2023-more-this-year/
This is interesting, but you don’t go back far enough. Apparently this model has been in use since 2004, or maybe 2011. Why not go back that far? I don’t dispute your analysis of its recent performance at all, but ask whether or not the (in)accuracy has changed since its inception, and by how much, and why.
There just isn’t enough information in your write-ups to really understand that model. Was it ever any good? Was it once good but has become worse? Did it replace a different adjustment method, and if so what was that method and did the birth/death model ever work better, at least for a while, than what came before it?
Obviously, it has been deficient in the ’20s, but that should be the starting point for examining adjustments, how they are done, and how they might be made more accurate. Anther thought: Are there structural changes in the economy that have invalidated the model, and if so what are they?
It is very tedious working with QCEW data. The download format is not easy to work with. There is lots of work requited to transpose rows and columns interspersed with data on 50 states. Working with an immense QCEW spreadsheet is not like downloading data from FRED that comes in an easy to use format, or I would have done it. If there is an easier way, I did not find it.
I sympathize, I really do. I was a securities analyst, and I know how tedious this kind of shit is. And just when you think you got it right, you see that you didn’t, and you are glad there are no sharp objects in the room and that the windows are sealed.
I looked a little more at the BLS’s discussion of the birth death model. On the surface, it appears as if BLS starts by setting enterprise births and deaths (and attendant job gains and losses) equal for purposes of monthly reports.
If that is correct, it would explain why net gains are suppressed during recoveries (when there would be more enterprise births than deaths) and exaggerated during recessions (when there would be more deaths than births.)
It looks like they then go back back and use (in their words) “an auto-regressive integrated moving average (ARIMA) time series model” to reconcile and revise. It looks like they used to do it annually, but since ether 2011 or 2014 they have done quarterly revisions.
If my outsider view is right, it would also explain why the household survey is more reliable. Both the household and establishment surveys are based on random sampling, but the household survey samples a complete population, while the establishment survey samples larger, established enterprises and uses a birth/death model to extend this to smaller firms.
Not only that, but I wonder if the reconciliations/revisions are reliable, given that they seem to emanate from that ARIMA. In the other direction, even if their accuracy is suspect, as long as the level of inaccuracy is low and constant during steady economic conditions, the output is comparable and useful at most times
The issue would be what you have been saying, which is that the birth/death model is especially unreliable at economic turning points. The missing piece is the pre-’20s history that has frustrated me because I want the whole story on most things. A story that, as you credibly assert, is a tedious furball to compile. Again, my sincere sympathy on that.
If you were inclined to become a glutton for punishment and go there anyway, I think (guess, actually, because think implies to much certainty) that you would find that the birth/death model and ARIMA reconciliation worked okay between the Panic of ’08-’09 and the covid shutdown, and that the distortions surrounding the Panic and covid were similar in magnitude.
Past that, I strongly reject the assertions by some of the more exposed nerve endings in your comment section that there is a Biden administration plot behind this. You haven’t been stupid enough to try to float that idea. What you have been saying, correctly, is that the monthly establishment numbers are suspect because the birth/death model doesn’t work well at inflection points, and that you think we have been at an inflection point for a while.
So how’d I do here?
That sounds like a conspiracy and those don’t exist.
how or why would 2 or more people ever collude in private to do anything. it’s so against human nature, the CIA told me so…
Good call, Mish. The NBER’s recession declarations (4- to 12-month lag) remind me of the famous order at the Battle of Bunker Hill, 249 years ago: “Don’t fire until you see the whites of their eyes.” LOL
or was it the Red of their Charts??
Why should anyone bother with these reports going forward?
The signal is in the revisions. It’s still meaningful data you just have to know what to look for.
Yep. As with anything govt or msm, you have to dig thru layers of BS to find the truth.
Like tea leaves or chicken guts …
Ritual is the establishment of recurring activities, that their real meaning eventually becomes lost, but the efforts still recur, because they have become established in the calendar, so too with number reporting.
the daily/weekly/monthly reading of the numbers by the priests of government and wall street are ritual, that gives the appearance of normalcy as the empire crumbles.
Why Now ?
Mish … you do excellent work, but what good does it do … everybody on Wall Street believes this crap every month and makes investment decisions based on it. This is nothing but a house of cards …
Yeah, that makes is difficult to “swim upstream”.
For starters, the ‘house of cards’ warning bell should’ve toot-tooted long before now. Smart money will soon run for the exit, or has already exited. When this tide turns, it might very well make 2008 look like a dribble.
Those who expect the Fed to bail them out, won’t exit. BTFD will lose bigly, IMHO.
yes this has been obvious for quite sometime, the problem is figuring out the when, the point of tipping that requires more resources than can be mustered for maintaining the illusion.
That is when it will happen, how do we calculate how much resources are more than the Empire is willing to extend to maintain the illusions??
You had a great interview with Adam Taggart, Mish!
Thanks!!
are those 818,000 jobs not on tax rolls – which BLS used for this number — because they are under-the-table illegal aliens?
No
The BLS monthly models have been f’d up since Covid
First in one direction, then another
BLS numbers rhyme with China’s ?
does this increase the likelyhood of us being in a recession?
The US is in a recession …. It’s just a Numbers game …
I use the Amazon rule to determine a recession.
1 if you are the head of Amazon, there is no recession
2.if you work at Amazon, you are in a recession.
derived from the Walmart rule of recession,
Own Walmart, no recession
Door greeter, recession.
Only if you previously thought the likelihood was <100% 😉
After BLS crew has taken off their shoes and socks to count to twenty everything else is guess work.
Joy through hope Mish. Actual jobs don’t matter
Yes, we just need to up child tax credits to $20,000 per child and go on a baby-producing spree to drive the economy.
If they increased it to $250,000, I might have another Baby. The problem is that my wife is 70. CAN WE ADOPT?
if boys can need tampons, and men can have babies, then there is no reason for your wife to be goldbrickin. I’d tell her to get busy, gettin busy.
As one of my gay friends told me 40 years ago during The Golden Age of Nothing Sacred, butt babies don’t Iive. Somehow I doubt that this has changed. LOL
We need to continue to activate monetary savings. S ≠ I for the banks. S = I for the nonbanks.
That’s what all the illegal immigration is for, that and Democratic voters
And they’re gone.
Mish, Congrats again, you are on a roll….