8-27-24: Deciphering Our Deceptive Jobs Data over Labor Day Weekend

by Gary Alexander

August 27, 2024

Back in January, I wrote a column here, titled, “The Monthly Jobs Data is Bogus and Premature… Yet it Still Moves Markets: Why?”  Apparently, traders are still snookered into overreacting to the jobs report.

It happened again, on Friday, August 2nd, when the Labor Department came out with a downbeat report of only 114,000 new jobs in July. Also, the jobless rate leaped up to 4.3%, from 4.1% in June and 3.4% last year. In knee-jerk fashion, the market tanked. In two trading days (Friday and Monday), the S&P 500 lost 4.8%, the previously hot Russell 2000 fell 6.7% and the “Magnificent 7” fell 7.1%. In Tokyo, the Nikkei 225 fell 17.5% in the same two trading days, but by August 16, the Mag-7, S&P 500 and NASDAQ 100 were back in positive ground and the Nikkei 225 had regained all its losses, in just 11 days. False alarm.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Last week, we learned that the jobs situation was even worse than the Friday BLS report told us. In fact, the BLS itself told us what I had already explained last January: Most Bureau of Labor Statistics jobs data is “bogus and/or premature.” The BLS admitted last week that its preliminary revision for the 12 months ending March 31 showed 818,000 fewer payroll jobs than first reported. We gained 2.08 million jobs, not 2.9 million, an average of 68,000 fewer jobs per month than first reported, 173,500 vs. 241,600 a month.

This revision emerged by comparing tax data with payroll data, since some workers were not on the tax rolls, likely undocumented immigrants, so they may work some real jobs without all taxes being withheld.

Last January, I warned about this trend, saying, “The number of jobs created each month was revised downward in 10 out of the last 11 months, and these cumulative revisions were ratcheted down by a total of 443,000 jobs, the largest downward revisions outside of a recession year since 2002” yet, “Like Charlie Brown kicking at Lucy’s ever disappearing football, it makes you wonder when Chuck will wise up.”

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The footnotes to the BLS monthly report admit the wide range of error possible in each month’s jobs report:

“The confidence interval for the monthly change in total non-farm employment from the establishment survey is on the order of plus or minus 130,000.”

That explains the wide variance in future revisions. You simply can’t count the total number of new jobs on the first or second day – or the first week – after the end of the month, especially if based on calls or queries to real human beings with their own agenda in answering questions from government agents.

As it turns out, the BLS takes two surveys each month – one being the household survey, to determine how many people at home are working or are looking for work, and the establishment survey, to ask businesses how many people work there. (The establishment survey is the one that was recently revised).

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

In the household survey, where they call homes and ask if you are working or looking for work, there was near zero job growth in the last year, from 161,209,000 jobs in July 2023 to 161,266,000 in July 2024 (+57,000, or +0.04%), so one job survey was flat, and the other was reduced from 2.90 to 2.08 million.

More Job Market Realities to Ponder Over Labor Day Weekend

Labor Day is traditionally the start of the real Presidential campaign season in election years, even crazy ones like 2024. Big convention rallies are mercifully over, and the stump speeches and debates can begin.

I prefer to look at history…and music…for clues. In my Labor Day radio program this weekend, I will play tunes with “work” in the title. It’s interesting to note that work songs congregate in two time slots: 1937-38, in the Great Depression, when Unions were strong, and then around 1960, about the drudgery of coal mining. From the first list, we get “Nice Work if You Can Get it” by the Gershwins, and “Hi Ho, Hi Ho, It’s Off to Work We Go” from Disney’s “Snow White.” They’re upbeat – just to have a job was heavenly, but in 1960, coal mining was dirty, dingy and low paying – “16 tons and what do you get? Another day older and deeper in debt.” There were lots of coal mining songs and a hit for a “Coal Miner’s Daughter.”

It’s no wonder that one of Dobie Gillis’s TV hippie friends cringed whenever he heard the word “Work.”

In 1950, there were over 537,700 coal miners in America, and over 100 of them usually died each year in coal mine collapses, with many others dying prematurely from lung diseases. According to CDC, in a little over a century (1900 to 2006), 513 underground mine disasters (mostly explosions and fires) killed 11,606 coal miners, or about 110 deaths per year. Thankfully, those jobs are now much rarer and safer.

Before the pandemic, I wrote a review here (on August 7, 2018) of Nicholas Eberstadt’s book, “Men Without Work.” He updated that book in September 2022 as “Men Without Work: Post-Pandemic Edition” (reviewed in the September 3-4, 2022, Wall Street Journal), including these segments:

“We now face an unprecedented peacetime labor shortage, with employers practically begging for workers, while vast numbers of grown men and women sit on the sidelines of the economy – even though job applicants have more bargaining power in the ‘Great Resignation’ than at any time in recent memory. Never has work been so readily available in modern America; never have so many been uninterested in taking it. Since Labor Day 2021, unfilled nonfarm positions have averaged over 11 million a month. For every unemployed person in the U.S. today, there are nearly two open jobs, and the labor shortage affects every region of the country.

“Major sectors are now wide open to applicants without any great skills, apart from the ability to show up to work, regularly, and on time, drug-free,” but “Padded by transfer payments, disposable income in America spiked in 2020 and 2021, reaching previously unattained heights…. In 2020 and 2021, a windfall of more than $2.5 trillion in extra savings was bestowed by Washington on private households through borrowed public funds” so that “men appear to have gone into a sort of premature retirement.” — from “Men Without Work: Post-Pandemic Edition” (2022).

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

One out of three working age men are not in the Labor Force – the lowest rate ever. Before the pandemic, the major reasons were: (1) skyrocketing disability claims and drug addiction; (2) lower incentives for work and higher rewards for not working; and (3) better off-the-grid options. In a 2017 paper (“Where Have All the Workers Gone? An inquiry Into the Decline of the U.S. Labor Force Participation Rate”), Alan Krueger, a Princeton University economist, cited findings that nearly half of all prime working age males not in the labor force (PWAM-NILFs) “take pain medication on a daily basis, and in nearly two-thirds of these cases they take prescription pain medication,” contributing to the opioid epidemic.

With far safer workplaces than the coal-mining era of 65 years (and 16 tons) ago, far more workers have discovered the magic of bad backs or designer diseases that keep them out of work (while quadriplegic Charles Krauthammer was able to finish medical school and work at the top level of several careers without use of 90% of his body. I guess some people are wired to work more passionately than others).

In the 1950s, men felt they had to support a family, so 87% of working age men were at work or looking for work. That number is now well below 70% and still chugging away below pre-pandemic levels:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

We’ve come a long way from hauling 16 tons of coal and owing our soul to the company store. There’s no need to enter a coal mine, but millions of healthy men need to put their big-boy pants on and get a job.