Economist: U.S. Job Layoffs Far Higher Than Labor Department Reported
The U.S. Labor Department’s job openings report may have overlooked a recent upturn in layoffsAccording to new research, Goldman Sachs.
Manuel Abecasis, a Goldman economist, stated in a report that the number of job opportunities in the United States has declined significantly without any increase to the official unemployment rate.
Abecasis says that data from advance layoff notices, which is not reflected in the Labor Department’s layoff rate numbers, suggests more people have lost their jobs over the past few months than is being reflected in official records.
The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) According to reports, the rate of layoffs was 0.9 percent on the last day in November 2022. This corresponds roughly to 1.35 million jobs lost.
However, Abecasis says that based on layoff notices filed under the Worker Adjustment and Retraining Notification Act (WARN), the actual layoff rate is 0.2 percentage points higher, which corresponds to around 1.65 million job losses.
He calculated that the actual layoff rate is 1.1 percent rather than 0.9 percent as reported in the government’s November JOLTS report.
The 1.1 percent official layoff rate, although still low in historical terms, is high enough to allow policymakers at Federal Reserve, including Chairman Jerome Powell, the statement that the labor market is stable. “out of balance” and is still too tight not to reduce inflation.
These new findings expose a major discrepancy in officially reported statistics concerning true U.S. joblessness numbers.
Examining the Contradictions in Government Data
“A key question is whether this pattern is now changing. Press reports indicate that layoffs are rising, but they tend to overemphasize the technology sector. The official JOLTS data indicate that the economy-wide layoff rate remains low, but they are released with a lag,” Abecasis.
Goldman analyst gathered data from advance laidoff notices filed under WARN. WARN requires companies and individuals to inform state governments of any plans to layoff 500 workers or more with a 60-day notice.
The law also applies if a company terminates 50 positions or if at least one-third the workforce is affected by the closure of an employment site.
Abecasis said that WARN notices were much lower than they were before the pandemic, in April and August 2022. However, they had been closer to the 2019 seasonal norm during the last few months.
WARN notices from December to January, from seven large states—California, New York, Texas, Florida, Pennsylvania, Virginia, and Ohio—were used by the Goldman team to create the report because their employment data were the closest to the national average and more timely than the JOLTS report.
Many of the smaller states also tend to be slower in reporting job losses compared to their larger peers.
Abecasis used WARN information data from these seven states in order to calculate his 1.1% layoff rate.
He noted further that the WARN notices for state were more consistent in their content with the latest data from The Conference Board on employment. (pdf), a nonprofit research group.
Philly Fed Offers Similar Analysis to Goldman Researchers
The Federal Reserve Bank of Philadelphia reached a similar conclusion to Goldman Sachs’ economist. Dec. 13th report.
“Our estimates incorporate more comprehensive, accurate job estimates released by the BLS [Bureau of Labor Statistics] as part of its Quarterly Census of Employment and Wages (QCEW) program to augment the sample data from the BLS’s CES that are issued monthly on a timely basis,” The Philly Fed.
It discovered that the U.S. economy added only a small 10,000 jobs to the 1.1 million jobs it reported in the second quarter 2022. This was despite the Fed’s aggressive 75-basis-point rate increases.
“In the aggregate, 10,500 net new jobs were added during the period rather than the 1,121,500 jobs estimated by the sum of the states; the U.S. CES estimated net growth of 1,047,000 jobs for the period,” The Philly Fed was closed.
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