Jobs: Downward Revisions and Weak Numbers Everywhere
The analysis below covers the Employment picture released on the first Friday of every month. While most of the attention goes to the Headline Report, it can be helpful to look at the details, revisions, and other reports to get a better gauge of what is really going on.
Current Trends
The BLS reported a gain of 142k jobs which was in line with expectations. For the first time since March, it was below the Household Survey which showed 168k jobs.
Figure: 1 Primary Report vs Household Survey – Monthly
Despite the Household Survey coming in slightly higher, for the year the gap is still very wide. The Headline Report is 1.47M vs the Household Survey showing 251k, representing 17%. This is by far the largest miss in over a decade.
Figure: 2 Primary Report vs Household Survey – Annual
The BLS also publishes the data behind their Birth/Death assumptions (formation of new business). In August, the BLS assumed 100k jobs added in their birth/death assumptions. This is relatively modest compared to previous months and perhaps explains why the Household Survey was larger than the Headline Report.
Figure: 3 Primary Unadjusted Report With Birth Death Assumptions – Monthly
The annual view shows that birth/death assumptions are positive while the economy has actually experienced job losses according to the raw numbers. It’s not until they seasonally adjust the numbers that it all turns positive.
Figure: 4 Primary Unadjusted Report With Birth Death Assumptions – Monthly
There is another report published by the BLS called the Quarterly Census of Employment and Wages (QCEW). According to the BLS, this is a far more accurate and rigorous report covering 95% of jobs available at a highly detailed level. Due to the rigor, the report is released quarterly on a 7 month lag. This report made all the headlines last week with the major revisions down.
The QECW had a big miss in February in particular.
Figure: 5 Primary Report vs QCEW – Yearly
On an annual basis, you can see that the QCEW has underperformed the Headline Report for three years in a row now. It is most appropriate to compare the raw Headline numbers, rather than the seasonally adjusted numbers. Based on this comparison, the QCEW is showing job losses of 1.43M vs only 1.06M losses for the Headline Report in 2024. That is a massive miss!
Figure: 6 Primary Report vs QCEW – Yearly
Digging Into the Report
Looking back at the August Headline report of 142k jobs saw an unemployment rate falling to 4.2%%.
Figure: 7 Change by sector
Jobs by Category
Almost every job category was at or below the 12-month trend except for Construction and Leisure/Hospitality.
Figure: 8 Current vs TTM
The table below shows a detailed breakdown of the numbers.
Figure: 9 Labor Market Detail
Household Survey Details
Another level of detail in the Household Survey shows full-time vs part-time job holders. In August, there were a large number of full-time employees converting to part-time. This is not a promising sign.
Figure: 10 Full Time vs Part Time
Revisions
The chart below shows how the jobs data has been revised in recent months. There have been significant downward revisions since January of this year. Even the weak jobs report in July was revised down from 114k to 89k.
Figure: 11 Revisions
Over the last three months, the data has been revised down by an average of 13k per month and 26k over 12 months. These revisions go unnoticed by the mainstream.
Figure: 12 Revisions
Historical Perspective
The chart below shows data going back to 1955.
Figure: 13 Historical Labor Market
The labor force participation rate is still well below the highs before the Global Financial Crisis. This month it stayed steady at 62.7%.
Figure: 14 Labor Market Distribution
Conclusion
Job numbers continue to come in weak which is putting pressure on the Fed to begin cutting aggressively now. The problem is that inflation has not been fully squashed. This could lead the economy down the very dangerous path of Stagflation.
