Those Pesky Jobs Numbers
“The Biden Administration has basically turned the US labor market into a Temp Agency for foreign workers. American workers are not getting jobs… They’re losing them.”
E.J. Antoni, Ph.D, Heritage Foundation
On Friday, June 7, the much-awaited jobs numbers were released and as usual, they can roil the markets for a few days. Also, select politicians may use the occasion for their own purposes.
From the vantage point of markets, the belief is that “unemployment” numbers, if soft enough, will prompt the FED to relent and start the long-awaited “easing”, while if they are strong, it means such a move will be delayed further. This obsession with “unemployment” and “easing” really does not do justice to the issue of whether the FED is easing or not. See our recent article, “Are We Back To the Everything Bubble.”
Yahoo Finance showed typical coverage: “The US labor market added more jobs than expected in May, defying previous signs of a slowdown in the economy. Data from the Bureau of Labor Statistics released Friday showed the labor market added 272,000 nonfarm payroll jobs in May, significantly more additions than the 180,000 expected by economists.”
A lot of jobs were created. Great for Biden!
While more jobs were created, the unemployment rose to 4%. Huh? Usually, that is caused by a shift in labor participation.
We begin this journey noting the difference between “The Establishment Survey” and the “Household Survey”. The Establishment survey is conducted by the BLS (Bureau of Labor Statistics) while the Household survey is conducted by the Census Bureau. One is basically business reporting on the number of jobs and the other is household reporting. Recently, there has been a notable divergence between the job numbers reported by the two surveys. The difference is large, over 4 million jobs. In part, this may be because the Household survey counts people, not jobs, and thus does not count the same as the Establishment survey does a person who holds multiple jobs.
chart
Sometimes one survey shows gains and the other shows losses. But as noted, The Household survey has recently shown substantially fewer jobs created than the Establishment survey. the Establishment survey is the one used most often by the media.
Besides these differences, critics point out other things about such numbers. First, they are subject to revisions and those future revisions are almost always downward. Secondly, it becomes a discretionary choice of which numbers to emphasize. This allows those with a political agenda to make a selective case, knowing full well the majority of the public will never sense the statistical sleight of hand. Just to ensure your eyes glaze over, below is some further detail.
- U-3 (Official Unemployment Rate): This is the most commonly cited measure, representing the percentage of the civilian labor force that is unemployed but actively seeking work. It includes those who have been laid off and are awaiting re-employment.
- U-1 to U-6 (Alternative Measures):
- U-1: Measures the percentage of the labor force unemployed for 15 weeks or longer.
- U-2: Includes job losers and those who completed temporary jobs.
- U-4: Adds discouraged workers (those not currently looking for work because they believe no jobs are available).
- U-5: Includes all marginally attached workers (those who are not in the labor force but want and are available for work and have looked for a job sometime in the past 12 months).
- U-6: The broadest measure, including part-time workers who want full-time work and the U-5 group (BLS) (St. Louis Fed).
These different measures often conflict because of the varying definitions of each method. For instance, U-6 is typically higher than U-3 because it accounts for underemployment and marginally attached workers, giving a broader picture of labor underutilization. Seasonal adjustments, sample sizes, and survey methodologies can also contribute to discrepancies.
There are other serious non-technical issues to be considered. Who is being employed? Who is doing the hiring? Are the jobs full-time or part-time? How many people are holding multiple jobs?
Within the general numbers are some disturbing trends. Most of the new jobs are coming from the growth of government and are by their nature, unproductive. Over the past year, the government has been the second-largest source of employment.
More than one job is needed in the private sector to support a worker in the public sector, that is if the private sector worker has some money left for his family.
The largest creator of jobs was the healthcare sector. Important as it is, taking care of all of us non-working elderly folks adds nothing to the national product. Healthcare is only productive in this sense if the sick or injured workers can return to production, as opposed to simply caring for those who are permanently out of the workforce. The elderly and others out of the workforce are mostly consumers of wealth, not producers of wealth.
This brings up another important issue: there are a lot of people out of the workforce, who are not elderly. A large number of working-age males (25-54) have dropped out of the workforce. BLS data shows that the participation rate has declined from a high of 98% in September 1954 to 89% in January 2024. That translates to about 7 million prime-age men have dropped out of the workforce. How come? Poor training and not qualified? How do they make a living? Is the “social safety net” providing benefits too close to what one could get on the lower scales of work pay? Are they living in Dad’s basement playing video games?
Importantly though, if these people are out of the workforce, why are they not counted as unemployed? If they were, unemployment numbers would be much higher, which could be embarrassing to some politicians.
Whatever the factors, having so many young men out of the workforce is a scandal. As the chart shows, only about a quarter are saying they are not working by choice. About half say they are having difficulty finding work. During a severe labor shortage? It appears almost half of those “not looking for work” are out because of mental or physical problems. This is huge.
Another factor is that among the available jobs, overwhelmingly if not exclusively, the jobs are going to the foreign-born, including illegal alien migrants. That has pretty much been the case since coming out of the Covid lockdown insanity. According to Geiger Capital, in May alone, 414,000 immigrants (legal and illegal) gained a job. Meanwhile, 663,000 native-born Americans LOST their job.
Not only is your vote being canceled out, but apparently your job is as well.
Another sign of stress is the number of people holding more than one job. Usually, this is done only when one job can’t pay the bills and is not a sign of excessive ambition. According to the Kobeissi Letter, the press story says 272,000 jobs were created. What they don’t tell you is that full-time employment actually FELL by -625,000. Most of the jobs created were part-time. Is an economy all that healthy if the vast number of new jobs are part-time?
The numbers aside, who benefits from a huge growth in the jobs for illegals and the huge growth of part-time jobs, that typically don’t come with benefits? These are things to think about when you hear Biden touting “his” employment numbers.
So the job number is more complicated and controversial than you would think.
Misinterpreting these numbers can lead to ascribing political credit where it is not due. It can also lead to confusion about the intent and timing of the FED and mislead investors. It may also mislead an economist’s read on the health of the general economy.
It should be appreciated, that while the employment number is important, important details rarely get mentioned in the rush for headlines and political talking points
