There is one predictable pattern for both Republican Administrations and Democratic Administrations. If they don’t like the monthly jobs reports, they shoot the messenger, who is the Bureau of Labor Standards (BLS), which produces the report. (They are often accused of political motives, but I have attended enough BLS classes to know that even Microsoft doesn’t have more geeks and nerds that the BLS.) Normally, such complaints are just an excuse, for bad economic performance, but the pandemic has scrambled what we thought we knew about the labor force.
Most economists expected this current report would show 550-600 thousand new jobs were created last month – instead, it was only 210 thousand.
How can we get excited about the excellent unemployment rate of 4.2% . . . if we don’t really know how many people are in the workforce?
The Labor-Force-Participation-Rate, dropped from 63% to 60% but has stabilized at about 61.5% – why has it not returned to the higher level?
We’re missing about four million workers.
We thought two million mothers would return to the labor force when school resumed but a large number did not – why not?
One reason might be that there have been 500 thousand new businesses that started?
The booming stock market may have encouraged early retirements, but how many? Social Security applications have not risen enough to explain it.
In addition, there has also been a developing pattern of upward revisions to past monthly jobs reports – why is better employment data arriving late?
Normally, the BLS conducts two surveys to estimate job growth, i.e., the household survey and the establishment survey.
The two techniques are no longer in the same “ballpark” with most of the upward revisions coming from the household survey.
For my professional career, the jobs report has been the most closely watched economic datapoint each month on Wall Street but no longer.
Some pundits predict GDP growth reports will become more important, but they are published once a quarter, not once a month.
I suspect the monthly quits report will become more important on Wall Street, as increasing rates of people quitting their jobs tells us about consumer confidence.
Stay tuned . . .