Job gains this year exaggerated by 1.1 million, Philadelphia Fed reveals

Labor data could have been overcounted by as much as 1.1 million jobs earlier this year, the Federal Reserve Bank of Philadelphia revealed in a new quarterly report.

According to the “Early Benchmark Revisions of State Payroll Employment” report for the second quarter of the regional central bank (pdf), the researchers’ estimated employment changes that occurred between March and June were different in 33 states and the District of Columbia compared to data published by the Bureau of Labor Statistics (BLS).

During this period, researchers at the Philadelphia Fed found that there were higher adjustments in four states, lower changes in 29 states and the nation’s capital, and minor revisions in the remaining 17 states. This included a 4.1 percent drop in payroll employment in Delaware and a 1.2 percent decline in jobs in New Jersey.

As a result, job gains could have been exceeded by more than 1.1 million.

“In total, 10,500 net new jobs were added during the period instead of the 1,121,500 jobs estimated by the sum of the states; the US CES [Current Employment Survey] estimated net growth of 1,047,000 jobs for the period”, the report indicates.

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Angela Perry (right), a recruiter with Cox Media Group, helps job seekers during the Mega Job Fair held at the FLA Live Arena in Sunrise, Florida, on June 23, 2022. (Joe Raedle/Getty Images )

This also means that payroll jobs were flat from March to June. In addition, current estimates indicate that job growth was 2.8 percent in the four months since June.

EJ Antoni, a Regional Economics researcher at The Heritage Foundation’s Center for Data Analysis, tells The Epoch Times that this “feels like another Pyrrhic victory.”

“The Philadelphia Fed data aligns well with the household survey showing a flat job market since March, in contrast to strong growth in the establishment survey,” he said. “Seasonally adjusted for this year’s BLS monthly jobs numbers have been abnormally large to the upside. The December number will have to be revised down by 30% more than normal to essentially balance the previous large upward revisions. Job growth was technically ‘front loaded’ in 2022.”

The Philadelphia Fed explained how its calculations differ from how the BLS analyzes the numbers.

“The Federal Reserve Bank of Philadelphia has developed early baseline estimates of monthly state payroll employment on a quarterly basis to forecast subsequent annual baseline revisions by the Bureau of Labor Statistics (BLS). Our process enhances the monthly Current Employment Survey (CES) payroll employment data with the more comprehensive Quarterly Census of Employment and Wages (QCEW) payroll employment data. The CES provides a timely estimate of monthly state employment data, but the QCEW follows some five months later with a more complete picture, covering more than 95 per cent of all employers. Our methodology was adapted from an approach pioneered by the Federal Reserve Bank of Dallas and modified to accommodate all 50 states and the District of Columbia,” the regional central bank noted in its explanation of the methodology (pdf).

Will this force the BLS to revise its numbers downward in the coming months?

BLS caught overcounting

Critics have said that there is something wrong with the monthly jobs report.

The BLS report is made up of two main surveys: establishment (business) and family. The former has posted stronger-than-expected growth for most of 2022, while the latter has remained broadly flat. Since March, the divergence has skyrocketed to 2.7 million workers.

The main explanation for this gap is that the BLS allows for double counting. This means that it will count every extra job a person has as other payroll. The home component does not support this feature.

As the number of people holding two or more jobs has increased by more than 8 percent since November 2021, to approximately 7.8 million, double counting has increased significantly over the past year.

Despite overcount issues, federal government data for November suggests the US job market is slowing. Full-time employment plummeted from October to November, part-time employment growth held steady, and the Labor Department diffusion rate— a metric that calculates the percentage of 256 industries that add jobs — plunged to 63.5, down from 74.8 last year.

Does this have political implications?

Economic observers say the strong jobs numbers are giving the Federal Reserve enough ammunition to keep tightening monetary policy. If the economy moves forward and a total of 4.37 million jobs have been added this year, the central bank would have no incentive to pivot and deviate from its rate hikes to stamp out inflation.

However, it’s unclear whether Fed Chairman Jerome Powell and other members of the Federal Open Market Committee (FOMC) are closely monitoring BLS data or looking at the plethora of other employment metrics. .

That said, market experts expect a combination of a slowing economy and a labor market next year as central bank rate hikes sweep through the system. Recession talk has also increased, especially after weak November economic data, from retail sales to manufacturing, released on Thursday.

According to a November survey by the National Association for Business Economics (NABE), economists project average monthly job growth of just 76,000 in 2023, up from 392,000 this year.

“NABE survey participants continue to lower expectations for the US economy, with projections for slower economic growth, higher inflation and a weaker labor market,” said NABE President Julia Coronado. , it’s a statement. statement. “The majority of those surveyed believe that there is a greater than 50% probability that a recession will occur in 2023.”

the federal reserve Survey of Economic Projections (SEP) shows civil servants forecasting unemployment rates of 4.6% in 2023 and 2024 and 4.5% in 2025.

andres moran

Andrew Moran has been writing about business, economics, and finance for over a decade. He is the author of “The War on Cash.”

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