This Jobs Report Revealed Strength in Inflation, Not the Labor Market

The January jobs report came in much stronger than expected. According to the labor department, the US economy added 467,000 jobs last month. This was significantly better than the 150,000 job projection. But there was some bad inflation news buried in the Labor Department data.

The unemployment rate ticked up to 4%. This was primarily a function of Labor Department adjustments that resulted in a large increase in the total population and the number of people employed. This directly resulted in a surge in the Labor Force Participation Rate. It jumped from 61.9% to 62.2%.

Model adjustments also resulted in big revisions in jobs created for prior months. The big upward revisions were almost all due to “seasonal adjustments.” As Peter Schiff noted in his podcast, “It’s not that the economy was so strong. It’s that the seasonal adjustments were so big.”

In fact, the BLS updated numbers for all of 2021, and the net result was 244,000 fewer jobs than originally reported for the year. A lot of the upward revisions were for the later months in the year, but there were significant downward revisions earlier in the year.

In the beginning of the year, the labor market was not as strong as the government was telling us. And at the end of the year, it wasn’t quite as weak as the government was telling us. But on balance, there was a net reduction in jobs.”

There were some other data in the report that Peter said he thinks is more significant – specifically the average hourly earnings. The projection was for a 0.5% increase. The actual increase came in at 0.7. Year-over-year, the consensus was for average hourly earnings to rise by 5.2%. The actual number came in at 5.7%.

So, the wage pressures are even stronger than the markets thought.”

Meanwhile, the average house worked dipped from 34.7 in the prior month to 34.5.

So in other words, workers are working fewer hours, but they’re being paid more for the hours they work. That means their employers are getting less output because people aren’t working as hard, but they’re having to pay more money to get that output. So, less stuff being produced, but more expensive labor costs to produce it. Obviously, consumer prices are headed up.”

Simply put, this is yet another signal that inflation pressures aren’t anywhere close to subsiding.

This report didn’t reveal strength in the labor market but it did reveal strength in inflation. It showed that the pricing pressures that we had in 2021 are continuing in 2022, and businesses are going to be under increasing pressure to raise prices in 2022 even more so than in 2021.”