The BLS released Business Employment Dynamics for 2024 yesterday. Let’s discuss.
The Business Employment Dynamics report covers job gains by new businesses and job losses by businesses going out of business.
The BLS Birth Death Model is based off stale BED data with annual benchmarks. A Birth-Death FAQ has some interesting details.
Are net birth-death forecasts seasonally adjusted?
No, they are calculated using population data that is not seasonally adjusted, and the forecasts are applied to the sample-based not seasonally adjusted estimates. Months with generally strong seasonal increases such as April, May, and June generally have a relatively large positive forecast. Conversely, months with overall strong seasonal decreases, such as January, generally have a relatively large negative forecast.Since the 2020 benchmark, CES estimates have been subject to persistent and relatively large birth-death forecast errors. To help address these forecasting issues, BLS modified the model-based component of birth-death by incorporating current sample information to inform the forecasts starting with the 2024 benchmark released with the January 2025 Employment Situation. This modification was only applied from April to October 2024, known as the post-benchmark period. November 2024, December 2024, and January 2025, as well as future monthly estimates, use birth-death components calculated without this modification. [So, years late, the BLS made a modification for 7 months, now tossed]
Currently, BLS will not use this method outside of the post-benchmark period as there is not sufficient time during the monthly estimation period to incorporate the additional processing needed to use this method in the current month’s estimates.
BLS releases the Quarterly Census of Employment and Wages (QCEW) monthly employment data on a quarterly basis 6 to 9 months after a given collection month. During current month birth-death processing, the forecasted portion of the birth-death model uses inputs derived from comparing the following:
- the QCEW-based employment data including business openings and closings
- the same QCEW data excluding the birth units and imputing monthly values to the death units
The difference between these two QCEW-based monthly values is the net of births and deaths. Finally, BLS creates an over-the-month change from this series, and those monthly values become the inputs to an ARIMA time series model used to create forecasts up to and including the current month.
These lagged inputs and the ARIMA forecasting approach can produce accurate forecasts when business openings and closings for current months follow predictable seasonal patterns. However, sharp trend changes or extreme events like hurricanes and pandemics can result in large forecast errors.
Seasonal Adjustments
Birth-Death data is “not seasonally adjusted, and the forecasts are applied to the sample-based not seasonally adjusted estimates.”
Birth Death is not seasonally adjusted but the BED data is. There is also unadjusted BED data but it is impossible to work with.
For example the unadjusted BED numbers for 2014 Q2-Q4 are +2.355 million, -648,000 and +503,000 respectively.
The S/A to N/A comparisons are: -163,000 vs 2.355 million, -1,000 vs -648,000 and 287,000 vs 321,000.
The BLS should give seasonally adjusted birth-death numbers but it doesn’t. One thing you should not do is subtract unadjusted birth-death numbers from the seasonally adjusted nonfarm payroll reports.
Private Payroll Issue
Importantly, BED and QCEW reports are private payrolls. Nonfarm payroll data includes government jobs.
Curiously, the monthly BLS job reports includes wage and hour worked for private employees, but the BLS does not report private payroll data. It does provide private “employment” numbers monthly but that’s from the household survey.
The BLS does have weekly private payrolls so how hard can it be to provide monthly numbers?
258,000 Negative Revisions in May and June Nonfarm Payrolls
Earlier today I noted Payroll Disaster, Jobs Rise 73,000 but Massive Negative Revisions
In May, the BLS reported 144,000 jobs. And in June the BLS reported 147,000 jobs.
I kept asking “Does anyone believe these reports?”
Today, the BLS says oops. Employment in May and June was a combined 258,000 lower than previously reported.
Monthly Revisions
- The change in total nonfarm payroll employment for May was revised down by 125,000, from +144,000 to +19,000
- The change for June was revised down by 133,000, from +147,000 to +14,000.
- With these revisions, employment in May and June combined is 258,000 lower than previously reported.
I was pretty sure big negative revisions were coming because of QCEW data.
QCEW stands for Quarterly Census of Employment and Wages. QCEW represents about 95 percent of the data with mandatory reporting.
QCEW vs Nonfarm Payrolls
The above image from QCEW Concepts.
CES stands for Current Establishment Survey, the BLS nonfarm payroll report.
The monthly jobs report is a survey of 629,000 worksites vs 12.2 million vs QCEW. The response rate of QCEW is ~90 percent. The response rate on CES is ~45 percent.
QCEW Report Shows Overstatement of Jobs
On June 16, I commented QCEW Report Shows Overstatement of Jobs by the BLS is Increasing
The discrepancy between QCEW and the BLS jobs report is rising.
It is inexcusable for the BLS to not incorporate QCEW data as soon as possible.
Instead, it relies on poor sampling of a small subset. On that poor sample the response rate is pathetic.
In addition, there is survival bias. In recognition of survival bias, the BLS concocted its absurd birth-death model.
And on top that that, struggling businesses have no incentive to respond. In contrast, large corporations likely have someone dedicated to filling out government surveys.
Where is DOGE when you really need it? If an organization continues to put out worthless numbers, then the organization itself is worthless.
The birth-death model from the Establishment Survey is guaranteed to be wrong at economic turning points, making the monthly employment report worse-than-useless at exactly the times when it would be most valuable.
The Household Survey is more robust but not as accurate as anyone needs.
The whole system needs to be rebuilt with modern information processing. They don’t even need AI, they just need to get out of the mid-1900s framework and into the 21st century. Payroll data is already reported weekly to the IRS, a subset of that (stripping out the personal information) could be sent to BLS and whoever else needs it to count workers.
From the party that created RussiaGate to win an election, ‘if this, then that’ LOGIC says they are capable of just about anything to win.
So, a hypothetical… If you wanted to stop Trump mid term, the only way is to impeach him, which requires control of Congress. To do so, the Democrats must win seats at the midterms.
Now, what better way can the Democrats ensure they will win seats than by a major economic crash arguably caused by Trump? Markets are at their peak, very overpriced so how much bad news will it take for a 25% drop? 50%?
BTW, this is NOT a conspiracy theory… it is having an open mind and examining facts given past behavior patterns… ‘Nothing is what it seems.’
New Whatever model suggest whatever the incumbents wish it to suggest.
These aren’t the statistics you need.
Move along.
My take is that the data collection will/could become significantly more accurate as the government implements its AI data collection and integration with its reports.
An entirely new approach is warranted given the years of relatively inaccurate reporting. I am certain that the Fed would benefit from better labor market data as well.
You are assuming the FED really cares about employment. They will use numbers to justify whatever action they please. They have shareholders to answer too.
Top Share Holders
Birth-Death Model Analysis:
– Are net birth-death forecasts seasonally adjusted? > NO!
– Is the population data using seasonally adjusted information? > NO!
– Is forecasting using seasonally adjusted information? NO!
I think I have everything I need, to understand that the Analysis is garbage! This is what Our Government uses for Data? Does that imply that our Government is garbage? Ugh!!!
most of the numbers from us gov is rubbish. waste of brain power to give it too much thought. was the found WMD considered part of GDP ?
But?But?But????
Could the growth and inflation numbers also be rigged????
Why would they do that to us?????
Probably stupid question, but since births are recorded and deaths are recorded, why would adjustments be necessary? That seems like it would be robust data.
The reporting of business creation and dissolution lags the other reporting.
There’s demand for more rapid monthly employment data, but the government agencies are still using a historical (pre-internet) reporting framework that is badly behind modern technological capability.
The birth-death model is guaranteed to be wrong at economic turning points, making the monthly employment report worse-than-useless at exactly the times when it would be most valuable.
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OT: Explaining to Mish how the Trump VAT tax works
Hope you do not mind Mish
I had previously tried to explain but Trump just showed the way
Trump put a 50 % tariff on Brazilian Coffee
At first Brazil may not raise prices significantly
they may move to other markets a lot of people like their coffee
plenty of demand
But Brazil will soon raise prices in US if it chooses to remain in US market
and the competition Non Brazil coffee producers will also raise prices
Why – because they can
All Coffee prices will go up – maybe slowly a dollar here a dollar there
But a rising tide raises all boats
The Coffee consumer will be paying a higher price for all coffee
and the US will tax a portion of Brazils a VAT tax because it is the
consumers choice to pay for the Brazil coffee
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yes not a VAT in design or perhaps even intent
but truelly in result
you of course realize
if Brazil stays in the market all coffee prices rise
and if Brazil leaves the market ( supply and demand ) all coffee prices rise
Trump just raised all coffee prices
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I believe Trump just made Coffee prices fungible. So Brazil can do whatever they want, but the rest of the World doesn’t have to. Some will lower their prices, by eating cost, and some will only partially do so. Others will raise, and some by a lot. Some will go out of business, while others increase theirs.
It’s called business on an even playing field. This should bring Coffee Prices down overall, as an end result. Maybe not the best, because they may not have to, and not for the worst, because they won’t last. We will be finally be paying what is the determined “True Value” to the consumer at least!!
Pretty abstract. How about Econ 101: competition lowers prices. Adding frictions to market entrants takes away competition. It takes away an incentive of various players to lower prices.
Repost because I just read your comment
please let me explain
If Brazil stays in the market
If Brazil (it is actually the importers) raised coffee prices
eg: even if 25 % higher price and manufacturer importer distributor seller share absorption of 25 % of tarriff
Then competition can raise their price – because they simply can – no one is in business to lose money nor to fail to make a profit
if Brazil coffee costs $ 3.00 more competition can feel free to raise their price $ 1.50
and because they will probably get more demand
thats how business works
If Brazil leaves the market
obviously there will be even greater demand for the competition products – it leaves a big hole in supply
people don’t just stop drinking coffee
obviously the competition will raise prices
economics 01
As far as I know coffee grows only in two places in the US, Hawaii (Kona) and California (Southern Santa Barbara County)–combined with avocado trees for shade. Then, there is Puerto Rico, so a windfall for them, if they don’t get devastated by hurricanes etc.
The Trump solution to high coffee prices will be??? Ersatz coffee–substitutes like acorns, chicory, postum… are all great investment possibilities /sarc.
The Trump solution is for higher prices for Americans and harming trade relations.
A malicious pedophile for a president is not exactly a recipe for success.
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The idea that tariffs raise prices is not true. Supply and demand sets pricing. Tariffs cut profits way more than raise prices. Do you really think businesses are not already charging as much as they can for goods? The profit margins on goods are all over the spectrum so the cost of production is not what sets the price. The media is owned by the same banks that import the goods. They want you to believe tariffs raise prices so they can raise prices.
The overwhelming evidence is companies pass on tariff increases. Period.
Proven time and time again.
And now we see Amazon, Walmart, Ford, GM, etc all announcing some price hikes to get a rebuke from Trump.
This is 100% clear.
Exactly explained a bit for Jimmy
If Brazil stays in the market
If Brazil (it is actually the importers) raised coffee prices
eg: even if 25 % higher price and manufacturer importer distributor seller share absorption of 25 % of tarriff
Then competition can raise their price because they simply can
if Brazil coffee costs $3.00 more they can feel free to raise their price $ 1.50
and because they will probably get more demand
thats how business works
If Brazil leaves the market
obviously there will be even greater demand for the competition products – it leaves a big hole in supply
people don’t just stop drinking coffee
obviously the competition will raise prices
It is so simple not even economics 101 economics 01
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The job report without detailed professions breakdown is borderline useless. Linkedin presumably is used more by professionals. If the job report cannot data-mine Linkedin and uses AI, than it requires a face lift and maybe a new boss.
I hear there’s an opening at the BLS. Mish you’re needed to come out of retirement and straighten out the mess.
I would second that. The chicanery for political bias that permeated this department is ridiculous! Honest summations have been missing from gov data for far too long, trying to fool the many economy predictors. Only those who really know how to decipher the bullshit managed to get their predictions in the ballpark range. Mish has the time and connections to ferret out truths. I’d love to see him get the job and change their model to better represent the data. At least Trump removed that idiot in charge. Hoping the replacement will be more forthcoming.
Original data good for way more on the plus side than the DOW -500 today. Nice game.
A new Trump appointee will provide the numbers he’s looking for exactly like the Biden appointee provided the numbers the Biden administration needed. Fake numbers for political purposes!?!?! What???? LOL
I call this the Data Chinafication. Get used to it and don’t over analyze it because crazy revisions are here to stay. And how accurate are the revisions? Who knows???
Thankfully they’re not fooling anyone with an ounce of curiosity and resourcefulness. Companies like ADP complete the picture.
My zoom church has members in the Midwest (Ohio, MI) and anecdotally people are having no problem finding hourly wage jobs, including good ones in factories. There seem to be plenty of openings, and people who have challenges (like the autistic son of someone I know) are being hired. The same is true (anecdotally) in Oklahoma. I don’t doubt that “professional jobs” are another matter.
As boomers age and exit the workforce, there will remain a lot of “work” left to do, many in the pursuit of their own comfort in their old age. Now delete the illegals from the equation and yeah, there will probably be chronic shortages for certain tasks. The problem/mismatch is that AI is replacing desk jobs that are surely well paid, and those people probably won’t be switching over to manual tasks (at least not right away and not voluntarily).
And yes, full employment reduces the need for lower interest rates. So in effect Americans are being systematically demoted to manual labor for basic survival.
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way–in short, the period was so far like the present period that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”
Slightly off Topic:
Here’s a very good video from Hersey Financial that explains how the BLS can manipulate CPI. The Big Take Away is that the BLS has gone from averaging about 10% of CPI inputs via “estimates” rather than real prices to 35% in the last three months. They, of course, blame staffing issues from Trump’s policies which may actually be true.
Over a Third of the Prices in the CPI are Now Just Estimates
I do not think it’s on purpose.
If it was, under Trump there would be pressure for better numbers. Besides, someone would know and spill the beans
How naive!
Fools find conspiracies everywhere
Cutting 0.5% in Sept 2024 for Kamala is idiotic.
Or even politically motivated on top of idiotic.
Fools miss obvious deception all the time.
Other fools disbelieve all conspiracy theories. Not weighing in on these stats. Just saying, for great wealth or power, people will conspire.
yup. one of my old buddies, deep in the bowels of ruling class for many generations always joked with me, of course it’s a conpiracy. for us to keep our wealth no matter what. the FED is a great example. free loans at discount window. and bailouts when investment banks make wrong bets. the stats us gov spits out is all rubbish. GDP is so government weighted. like dropping bombs in yemen is productive. unemployment numbers are a joke, too.
Per Wiki, the BLS had 2,321 employees in Sept 2024. My guess is that’s at most 2,000 or will be by Sept 2025.
Since the Dems have controlled government for 12 out of the last 16 years, I would imagine a review of the BLS employee’s political donations would be significantly slanted towards the Dems.
Again, the lady who was just fired oversaw the 818K write down from 16 months ago. The Deep State is not a conspiracy.
I assure you that, if the GOP are able to string together a couple more elections to go 12 years like the Dems have, they will most certainly become DEEP STATE BELIEVERS as they eventually try to dig out of the conservative juggernaut that Trump & the next GOP president will drag the Federal government towards.
It can go both ways, in my opinion.
And idiots trust the govt
RussiaGate being a prime example.
“Besides, someone would know and spill the beans.”
Folks need to read the statement above over and over and over again until it sinks in. The only way the above wouldn’t apply is if only one person performed all of the data gathering, analysis, and reporting. That clearly isn’t happening.
Ever heard of lies, damn lies and statistics?
It’s not only the CPI, the GDP is also merely estimated and made up. For instance, the rent from the house you own and live in is counted every year in the GDP, although it is not rented. Many other things that don’t happen are counted and they call it imputing. No other country calculated its GDP this way. The US are a Potemkin village.
correct. and the government counts bombing deserts as productive. in GDP
Dang – Trump’s right! Powell does need to cut rates. /kidding
We’ll see where inflation goes. Next Fed meeting is next month anyway.
Yes because 4+% is high in the Trump Israel-first universe. He wants interest rates at 1% screwing everyone in cash. Interesting that the big beautiful bill didn’t have any tax breaks for interest or dividends. Such a flawed man, such a compromise man. And yet here we are.
Yeah, I supported Trump all three times but am thoroughly disgusted by many/most of the things he’s done so far. I don’t regret my vote however as Kamala would have done very little different with regard to those issues, while at the same time doing many awful things that Trump hasn’t done or is actively resolving (like the wide open border).
In case you haven’t noticed, the rates are cutting themselves. The Fed is mostly a joke as they really only wait for the bond market to give the command, then cut. In reality, rates shouldn’t even be set by them at all, they should be set by the free market and that’s it. The Fed only exists to create never ending win-win situations for the banking elites.