Labor data might have been overcounted by as much as 1.1 million jobs earlier this year, the Federal Reserve Bank of Philadelphia revealed in a new quarterly report.
During this period, Philadelphia Fed researchers found that there were higher adjustments in four states, lower changes in 29 states and the nation’s capital, and lesser revisions in the remaining 17 states. This included a 4.1 percent drop in payroll employment in Delaware and a 1.2 percent decrease in jobs in New Jersey.
As a result, employment gains might have been overcounted by more than 1.1 million.
“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 [Current Employment Survey] estimated net growth of 1,047,000 jobs for the period,” the report stated.
This also means that payroll jobs were little changed in the March-to-June span. In addition, current estimates indicate that employment growth was 2.8 percent in the four months since June.
E.J. Antoni, a research fellow for Regional Economics in the Center for Data Analysis at The Heritage Foundation, tells The Epoch Times that this “feels like another pyrrhic victory.”
“The Philly Fed data aligns well with the household survey that shows a flat job market since March, contra the robust growth from the establishment survey,” he said. “The seasonal adjustments to the monthly headline jobs numbers this year from BLS have been abnormally large to the upside. December’s number will have to be revised down 30% more than normal to essentially balance out the earlier large upward revisions. Job growth was technically ‘front loaded’ in 2022.”
The Philadelphia Fed explained how its calculations differ from how the BLS crunches the figures.
“The CES provides a timely estimate of monthly state employment data, but the QCEW follows about five months later with a more complete picture, covering more than 95 percent of all employers. Our methodology was adapted from an approach pioneered by the Federal Reserve Bank of Dallas and modified to accommodate all 50 states and the District of Columbia.”
BLS Caught Overcounting
Critics say that there’s something wrong with the monthly jobs report.The main explanation for this gap is that the BLS allows double counting. This means it will count every extra job a person possesses as another payroll. The household component doesn’t permit this feature.
Because the number of people holding two or more jobs has risen by more than 8 percent since November 2021—to roughly 7.8 million—double counting has increased significantly over the last year.
Does This Have Policy Implications?
Economic observers contend that the strong labor numbers are giving the Fed enough ammunition to continue tightening monetary policy. If the economy is humming along and a total of 4.37 million jobs have been added this year, the central bank would have zero incentive to pivot and deviate from its inflation-busting rate hikes.It’s unclear, however, if Fed Chair Jerome Powell and other Federal Open Market Committee members are strictly monitoring the BLS data or watching the plethora of other employment metrics.
That said, market experts expect a combination of a slowing economy and labor market next year as the central bank’s rate hikes travel their way through the system. Recession talk has also heightened, especially following November’s weak economic data, from retail sales to manufacturing, released on Dec. 15.
According to a survey by the National Association of Business Economics (NABE), economists project average monthly job growth to be just 76,000 in 2023, down from 392,000 this year.
