Broken Job Numbers are Misleading the Public and the Markets.

Over the past few months, the media and the Biden administration have been consistently talking about the job numbers and how impressive they are. They are using them to convince us that the economy is still in good health and that there is nothing the average American should worry about. If you take a closer look at the job numbers that have been released over the past few months, you will probably realize how deceptive the numbers are starting to look.

JOLTS Survey.

The JOLTS survey, a highly respected survey run by the Bureau of Labor Statistics (BLS), that measures job openings and job quits in the US. This past JOLTS survey saw job openings soar 360k after over a year of declines. This was roughly 700k higher than the wall street consensus and higher than the highest wall street prediction. This could only mean one of two things; wall street is bad at predicting job numbers or something odd is going on with the numbers. This report also showed that job quits fell to the lowest level in two years. Falling quits is usually interpreted as people being nervous about finding a replacement job. So, if job openings soared then you shouldn’t see job quits tumble. Those counteract each other.

The BLS collects the JOLTS’s survey data by sending questionaries to companies. Prior to covid, JOLTS had a 60% response rate on their questionaries. After covid hit, that number dropped to 30%. Now this might explain why the numbers seem off. If you lost a significant amount of your survey data, then your results might be skewed. For example, if the majority of the 30% of responders are startups, then you might see huge job growth being reported. If your 30% is mostly government contractors, then you might see growth correlated with government spending. Either way, losing 50% of your survey size will cause issues. However, if the skewed data could benefit the administration that controls your funding, then you might be more willing to release it skewed.

Household vs Government Survey.

Another interesting job statistic that is screaming manipulation is employment level. This employment level graph compares the nonfarm payrolls (government survey) to the employment level (which is a household survey). In the graph, you can see that something broke in March of 2022 and it hasn’t been the same since. This could be explained by the government’s recent change in defining what constitutes as a job. If you work a 9-5, drive uber on Saturday’s and cut your neighbor’s lawn then the government counts that as 3 different jobs. This is probably what caused the 2 million increase in jobs reported by nonfarm payroll vs employment level, documented in the graph below.

Furthermore, nonfarm payrolls have beat expectations for 14th months in a row. Typically, if you were predicting something and continued to miss in the same direction, multiple times, you would adjust to find the ceiling or floor. This adjustment idea can be seen from 2000 to 2022 in the graph below. When a few months of consecutive beats or misses happened, the BLS would adjust to find the ceiling or floor. That’s why the lines never got so big. However, in 2022 something changed.

Why does all of this matter?

This matters because the Fed is using this information to make decisions on interest rate hikes. If the Fed believes the job market is in a strong place, then it will continue to hike interest rates. If the job market isn’t strong and the Fed continues to hike interest rates, then something could break causing a significant economic downturn.