The Bureau of Labor Statistics has revised its estimates of job growth over the last year downwards by more than 800,000 jobs. Josh Shafer reports at Yahoo Finance:
The US economy employed 818,000 fewer people than originally reported as of March 2024, showing the labor market may have been cooling long before initially thought.
The revisions are a yearly practice from the Bureau of Labor Statistics; final revised numbers are expected to be released early next year.
The report, released Wednesday morning, showed the largest downward revisions to the professional and business services industry, where employment was revised down by 358,000 during the period. Leisure & hospitality saw the second-largest downward revision of 150,000.
The report moves down the monthly job additions seen in the US economy over the time period to 174,000 from 242,000.
“Despite this big downward revision, that’s still a very healthy growth rate in terms of the monthly jobs added to the economy,” Omair Sharif, Inflation Insights president, told Yahoo Finance.
I think that’s about right. Job growth was still good; it just wasn’t as good as previously estimated. For context consider this graph:
That chart does not include the downwards revision. As you can the revision is not catastrophic.
To my eye more concerning is this from Business Insider. The M2 money supply has decreased, a sign that spelled every time it has occurred in the last century.
The US money supply is flashing a major warning to the US economy, according to Wharton professor Jeremy Siegel.
M2 money supply, which includes cash, checking deposits, and other highly liquid assets, bottomed out around $20.7 trillion in April this year amid aggressive rate hikes, according to Federal Reserve data. That’s a 4% drawdown from the prior all-time-record of $21.7 trillion, which was recorded in 2021.
Money supply then rebounded through the summer, but has recently returned to its decline, nearing April’s low.
That marks the the longest stagnation in the M2 money supply since World War II, Siegel said in an interview with CNBC on Monday.
The feeling seems to be that recession is likely over the next six months. The reason it is more troubling than your run-of-the-mill economic slowdown is our flat output. That suggests that deficit spending to stimulate the economy will go straight to inflation.
Unlike some I don’t have a problem with the federal government meddling with the economy. I just think it ought to meddle in the direction of greater production rather than greater consumption. Unfortunately, the direction of policy has been wrong for a very long time.
I don’t know why one would consider 176k job growth to be “good”. And this isn’t the final revision; there’s a good chance it will get worse.
176K is consistent with a rising unemployment rate (which notably has risen from 3.5% to 4.3%). Its also risen enough that its triggered the Sahm / McKelvey rule — a reliable recession signal.
In fact, Mish Shedlock makes a good case we are currently in a recession that started in the last couple of months.
Let me put it this way: gaining jobs is better than losing jobs. I would be happier if the jobs we were gaining were better jobs and more of them were going to the citizenry (3/4s of new jobs since 2019 have gone to immigrants).
I seem to remember something like 140k-150K being the rate needed to “break even”…but the last time o was paying attention was probably the early 00’s so I don’t know what that number is now with changing demographics.
Both Home Depot and Lowe’s are reporting sharp downturns in sales, which also suggests we are entering (or are in) a recession.
CStanley:
Per the Census Bureau the “natural increase” in the U. S. is around 150,000/month. That underscores the policy conflict.
Based on “natural increase” an increase in jobs of 175,000 isn’t great but it isn’t bad, either. Based on total increase (“natural increase” + immigration) with 3/4s of jobs going to immigrants it is very bad indeed. Restraining the rate of immigration to historical levels is one way of improving things; to maintain a materially open border while touting the low unemployment rate is incoherent. For that to be workable we’d need a negative unemployment rate.
The Atlanta Fed has a calculator for this number. At present, assuming LFPR and UE stay steady we need about 112,000 jobs a month to stay level. Adjusting for age and lots of boomers retiring, LFPR is at historically high levels. Anyway, lots of experts predicted we would be in a recession at least a year ago and some are trying to salvage their reputations by claiming that we are secretly in one right now. In context, we have had an overheated economy the Fed has been trying to slow by increasing rates. We expected to see slowing numbers. Still seems like we might have a recession but the numbers remain mixed eg manufacturing was reported down this morning but services were unexpectedly strong. Jobs numbers slowing but still good.
https://www.atlantafed.org/chcs/calculator#:~:text=Return%20to%20pre%2DCOVID%20Unemployment%20Rate&text=A%3A%20Keeping%20the%20labor%20force,to%20the%20pre%2DCOVID19%20level.
Steve
The San Francisco Fed did a study this summer.
https://www.frbsf.org/research-and-insights/publications/economic-letter/2024/07/breakeven-employment-growth/#:~:text=According%20to%20a%20baseline%20projection,by%20the%20end%20of%202025.
The summary is the breakeven rate largely depends on your assumptions of immigration rate. If you assume relatively “low” immigration like what occured in 2019 – it’s about 140k — which is roughly consistent with the Atlanta Fed.
But if you were to use the immigration numbers as projected by the census bureau for 2023; which is much higher, it was closer to 175k, if you use the numbers from the CBO which I think used better real time data, the breakeven rate was 240k!
Let’s just say the unemployment rate has been increasing for a year; that is a signal that whatever number of jobs were created; it was below the “breakeven rate”.
A last note; given the jobs report has weakened through 2024 but the same methodalogical errors haven’t been corrected; the economy could be producing little to no jobs currently.
I dont think a lot of the jobs being done by illegals get reported. I know for a fact that the neighbors up the street using an illegal nanny and paying her cash were not reporting her. Also interesting that while the Atlanta Fed does not appear to account for immigration the SF Fed does not account for UE and I cant tell if they account for LFPR.
Steve
I think Zerohrdge had the better analysis.
After the Covid rebound job growth has been barely acceptable, and the slope of the curve less than pre. As Dave pointed out, the composition has been – charitably – poor.
And I should note, and pointed out a ZH, in the face of massive monetary infusion with the attendant costly inflation, job growth has been piss poor.
“I dont think a lot of the jobs being done by illegals get reported”
You must define by which is “illegal” and “reported”.
Most migrants that are coming via asylum claims and adjudication are pending are eligible for work authorization after 180 days. So there isn’t an incentive to underreport a migrant vs a non-migrant.
And the over estimation of jobs created is occurring in the survey of large employers — and they aren’t likely to be employing large numbers of people without work authorization or underreporting the number of people employed by them with work authorization.
The most charitable way of interpreting the comment (if it is even true) is the government overestimates the number of high value jobs like GM factory jobs while underestimating the number of low value jobs like lawn-mowers.
“The most charitable way…”
Truer words have never been spoken.