Goldman Economist Says US Layoffs Were Far Higher Than Labor Department Reported

People line up outside Kentucky Career Center prior to its opening to find assistance with their unemployment claims in Frankfort, Ky., on June 18, 2020. Reuters/Bryan Woolston

The U.S. Labor Department’s job openings report may have overlooked a recent upturn in layoffs, according to new research from Goldman Sachs.

Goldman economist Manuel Abecasis stated in a report that available job openings in the United States have declined by a large margin without a boost 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) reports that the layoff rate was 0.9 percent as of the last day of November 2022, which corresponds to 1.35 million lost jobs.

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.

Although the 1.1 percent unofficial layoff rate is still substantially low historically, it is significantly high enough for policymakers at the Federal Reserve, including Federal Reserve Chairman Jerome Powell, to state that the labor market is “out of balance” and is still too tight to seriously reduce inflation.

These new findings reveal a major discrepancy within the officially reported statistics regarding true U.S. unemployment numbers.

Reviewing 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,” said Abecasis.

The Goldman analyst collected data from advance layoff notices filed under WARN, which requires companies to inform state governments and affected individuals of any plans to lay off 500 or more workers with a 60-day advance notice.

The law also applies to any companies that terminate 50 positions when an employment site is shut down, or if the number of layoffs account for at least one-third of the total workforce.

Abecasis suggested that WARN notices were well below their pre-pandemic levels, between April and August 2022, but had risen closer to the 2019 seasonal norm over 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.

This was the reason why Abecasis used WARN notice data from those seven states to calculate his 1.1 percent layoff rate for the period.

He further noted that the state WARN notices were more consistent with the latest employment survey data from The Conference Board (pdf), a nonprofit research group.

Philly Fed Holds Similar Analysis as Goldman Researchers

The Federal Reserve Bank of Philadelphia also came to a similar conclusion as the Goldman Sachs economist in a 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,” said the Philly Fed.

It found that instead of the 1.1 million new jobs reported by in the second quarter of 2022, the U.S. economy only added a minuscule 10,000 jobs, just as the Fed aggressively began a series of 75 basis-point rate hikes.

“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 concluded.