November Jobs Report May Be Misleading, Experts Warn

Conservative News DailyDecember 8, 2022

The November jobs report topped market expectations for the seventh consecutive month, showing robust growth at 263,000 new jobs last month. But economists are beginning to notice a divergence within the Bureau of Labor Statistics’ (BLS) monthly snapshot of nonfarm payrolls.

The difference rests in the establishment and household surveys.

Jobs Report: Establishment vs. Household

Last month, the establishment survey of businesses reported the rosy headline figure. However, the household survey, which samples households rather than businesses, recorded a decline of 138,000 positions. Since March, the establishment component has spotlighted solid and better-than-expected employment gains, while the household portion has been flat.

In total, the divergence has ballooned to an astounding 2.7 million workers.

The reason for the enormous gap is that the establishment component of the BLS report permits double counting, meaning that it will count every additional job that a person obtains as another payroll. The household figure doesn’t.

Over the past year, double counting has surged as more people have taken on two or more jobs amid elevated price inflation. Since November 2021, BLS data show that the number of Americans holding multiple jobs has increased by more than 8 percent to above nearly 7.8 million.

“In fact, the double-counting in November was about 454,000 jobs—substantially more than the headline jobs number. It also explains the entire monthly divergence between the two surveys, which was 401,000. It turns out the economy might not have been employing any new people at all in November,” wrote E.J. Antoni, a research fellow at The Heritage Foundation.

Antoni calls this “unprecedented.”

“It appears as if something broke in the labor market that month. It could’ve been the sky-high inflation which forced many people to start getting additional jobs and caused businesses to begin transitioning from full-time to part-time hiring,” he told The Epoch Times. “The CPI rose 1.2 percent in the month of March alone, while the PPI rose 1.7 percent month-over-month and 11.7 percent year-over-year, so both workers and businesses were squeezed.”

According to Heidi Shierholz, former president of the Economic Policy Institute, the household survey is superior to the establishment alternative in discovering “inflection points.”

“The household survey tends to pick up ‘inflection points’ quicker than the establishment survey, for methodological reasons,” she wrote in a tweet. “So, it’s possible that the household survey is picking up a downturn that is not yet showing up in the establishment survey. Time will tell.”

Ultimately, according to Mike Shedlock, an investment advisor for Sitka Pacific Capital Management and author of the “Mish Talk” global economics publication, the media coverage of the BLS report is “missing the big picture.” But the divergence is skewing the employment figures to the upside, which is influencing the global financial markets and monetary policy at the Federal Reserve.

Weakness in the Labor Market?

The U.S. stock market tanked initially after the November jobs report, as traders were worried that the central bank would turn hawkish on better-than-expected employment data.

However, the overall data might be pointing to a slowdown in the national labor market.

On a nonseasonal basis, full-time employment fell from October to November, while part-time job growth was relatively flat. This is a crucial trend because companies typically shift from full-time to part-time employment before a recession. Employers will then begin initiating layoffs.

In addition, self-employment levels declined by 421,000, to 9.67 million.

The Department of Labor’s diffusion index—a calculation that measures the percentage of 256 industries adding jobs—slipped to 63.5 (anything above 50 indicates expansion). In November 2021, the index stood at 74.8.

Businesses are beginning to eliminate positions, according to various private-sector measurements.

In November, U.S.-based employers announced nearly 77,000 job cuts, the highest since January 2021, according to data from Challenger, Gray & Christmas. The job cuts were concentrated mainly in the tech sector (52,771), followed by consumer products (4,176), health care (2,985), and construction (2,612).

Numbers from the ADP National Employment Report (pdf) found that job creation slowed by the most since January 2021, with 127,000 added in November. Small businesses (1 to 49 employees) shed 51,000 jobs, mid-size (50 to 499 employees) added 246,000, and large (500-plus employees) eliminated 68,000 positions. When assessing losses in private employment, the industry leaders were manufacturing (minus 100,000), professional and business services (minus 77,000), financial activities (minus 34,000), and information (minus 25,000).

“Turning points can be hard to capture in the labor market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains,” Nela Richardson, chief economist at ADP, said in a statement. “In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting and the post-pandemic recovery is stabilizing.”

Cody Harker, head of data and insights at recruitment marketing firm Bayard Advertising, said the “cooling trend” will continue.

“As we head into December, jobseeker traffic will continue to slow—from our data lake, we saw click traffic decline by about 19 percent month over month, falling in line with expected trends,” he wrote in a note. “While the labor market remains relatively stable, the cooling trend we saw last month will continue. Additionally, slowing job gains, inflationary pressures, and macroeconomic factors intensify the risk of a recession early next year.”

The December jobs report will be released on Jan. 6, 2023.