The Jobs number Scam

The U.S. Administration is cheering the non-farm payrolls report for October which showed 150'000 new jobs were created. They see this as good news and a booming economy. It's the kind of positive story that the incumbent President Joe Biden would like to see ahead of the 2024 elections.

Before you get too bullish, let me tell you that its not that good a number. It's the second worst number this year, and after it has been revised down, (as usually happens), it will probably be the worst number.

When you dig into the numbers, things don't look quite so rosy. In fact, they look pretty dire. The US is heading into a recession.

The US population is increasing far faster than jobs are being created. Thanks mainly to immigration the population is increasing by about 3.1 million a year.

So here's the first bit of bad news:

The number of people available to work fell, whilst the number of non-workers rose. Despite the US population rising by 214'000, the number of people in the labour force FELL by 415'000.

Population up, workers down = not good.        

Here's the next bit of bad news:

The 99'000 new private (i.e. productive) employees had to support an extra 51'000 government workers, an extra 147'000 unemployed, and an extra 415'000 who left the labour force. That's 613'000.

Six non-workers were added for each productive worker = not good        

Government workers have to be paid for by the tax payer, i.e. by those who are actually working hard to produce something. Does one extra government worker for every two productive workers make any sense? No it doesn't. If anything the government worker is creating extra paperwork and administration that gets in the way of doing real jobs.

America should be increasing the number of productive workers and reducing the number of government employees

Here's the next bit of bad news:

The number of new jobs you are seeing might not be real. Every statitician knows this trick. If you want to make today's number look good, just revise the previous number downwards. And that's exactly what they did, and the month before, and before and before and so on. In fact, the non farm payrolls number is habitually rounded down, month after month. It makes the current month look better than it is. If September's number hadn't been revised down, by 101'000, we wouldn't be reporting 150'000 jobs created. The number would be 49'000, an awful number compared to the population increase.

Here are the revisions to each monthly number since the start of the year.

Each of the negative revisions shown above made the number reported for the subsequent month look better than it really was. October's number will undubtedly be revised as well. The supposed 150'000 jobs growth could easily vanish, or even turn out to be negative. That would make November's figures seem rosier than they really are. Don't be fooled.

Juggling the numbers = not good        

Here's my last bit of bad news:

The BLS non-farm payrolls report isn't the only employment survey produced by the BLS. They also produce another employment survey which rarely gets quoted. It's called "Employment Situation Summary Household data, seasonally adjusted".

What does this tell us about job creation?

Do we see the 150'000 job creations?

Answer: No we don't.

In fact the Household data employment report shows that 348'000 jobs were lost in the month of October!

Here's an extract:

348'000 less people employed in one month = not good        

So, in conclusion, in the month of October:

• The population rose but the workforce fell
• The number of unemployed rose
• Every productive job created saw six non productive people added to the population
• Habitual revisions are painting a rosier picture
• It's likely that the 150'000 "new jobs" in October will be revised downwards.
• The houshold report shows that 348'000 jobs were lost. It's probably closer to the truth.

The below chart shows the unemployment numbers swing up and down. The past recessions are shown in red. Unemployment is rising and it looks like we are about to enter a recession.

What does that mean? It means the tax receipts will fall, the expenditure on social will increase. The governments already stretched finances will be stretched further. It will be harder for the government to borrow money except at higher rates. The Fed is likely to step in as buyer of the last resort of Treasury paper. When that happens, it's back to the printing press. The whole world will know in a micro-second. That will almost certainly cause a melt up in asset prices.

All data for this article was taken from the US Bureau of Labour Statistics (BLS) and can be viewed here: Bureau of Labour Statistics - Non Farm Payrolls Report for October 2023