REVISED: The Economy Lost 70K Jobs In March
Those Economic Reports that you see nearly every day are based, by and large, on fundamental econometric models. Reports like overall economic growth, the GDP (Gross Domestic Product), employment reports, the Civilian Labor Force, or the Participation Rate rely heavily on underlying mathematics models. Many of those models have been used for years and years and have proven to be an accurate and reliable measure of the economy.
Recently, however, some of those models and the Economic Reports they produce have gone off the rails. It’s especially true for reports on the number of gainfully employed workers.
There is no doubt that employment will be one of the significant issues in the upcoming Presidential Election. In Wednesday’s Republican Presidential Debate, US Senator Tim Scott touted the employment record of the Republican-led Senate two years ago — that fit right in with Washington’s overall view of the economy.
You’ll notice that when discussing the economy, the most used statistics are the latest unemployment numbers (the flip side of the employment level). The current Secretary of the Treasury, Janet Yellen, was a Labor Economist by academic training. And if you notice, nearly every time the Chairman of the Federal Reserve speaks, he too refers to the current level of employment. While over at 1600 Pennsylvania, almost every month, the White House reports on the Employment Situation.
It’s an equation that’s been going on for years. When employed, people usually give credit to the incumbent and vote for whoever is in office. Positive employment numbers translate directly into incumbent votes. Thus, a lot is riding on getting those numbers correct.
For 139 years, it’s been the responsibility of the Bureau of Labor Statistics to add up all the plus and minuses and tell us how American workers are doing. For the first twenty years, the BLS was headed by a statistician, Carol D. Wright. As the longest-serving Commissioner, you can bet that Mr. Wright started the Bureau on the right foot, ensuring that the Employment Reports presented were statistically accurate. Each month, those reports were refined and validated until 2021. Then things began to go haywire.
So, let’s dig into the latest revision to the March BLS Benchmark Report on Employment. It’s the fundamental report upon which all the rest are based. The Benchmark Report tells us the total number of people employed in the country. From this, the BLS derives all the other published reports, for instance, the Unemployment Rate, the Participation Rate, and all the rest. What’s more, on this Benchmark Report, the BLS projects its view of future employment growth. If this report is wrong, you can throw almost everything else out, as those reports are also inaccurate.
In practice, the way it works is that the Bureau later comes back and “revises” the earlier report and, at least in theory, revises all subsequent reports based on the Benchmark.
So, with minimal fanfare on Wednesday morning, the Bureau revised its March Benchmark Report.(1) Wait just a minute; they said employment for March did not grow by the 236,000 that we reported earlier; it actually fell by 70,000.(2)
Stop the presses: This is huge news!
We’re saying here that the labor market is not growing, and the economy is not adding new jobs. The economy is losing jobs. In fact, there were 70,000 fewer workers employed in March than in February. In other words, as measured by those employed, this economy is declining, not expanding.
Now you see why the Bureau of Labor Statistics announced this quietly three months after the fact. It’s not something you want to headline; it is an error with incredible implications. This revision may have a tremendous impact on the Election. It means the Federal Reserve may have to revise its economic projects and curtail its interest rate hikes. And finally, this likely indicates that the economy is already in Recession.
This week’s revision answers several questions that economists have had recently. Many have felt that the economy is fragile and that a Recession is at the doorstep. Yet the “numbers” have not yet borne out their feelings. And that’s been chiefly because of a perceived strong labor market. But now it appears that was merely an illusion. The Labor Market isn’t strong at all; actually, it’s pretty weak.
It may take the “powers that be,” Wall Street, the Federal Reserve, and the Administration several weeks to appreciate this fact. But there it is for all to see.
Let me speculate on a possible cause of this drop in overall employment. There is another little-noticed report by the Bureau of Labor Statistics called “Civilian Labor Force — With Disability, 16 Years and Over.” This report details the number of adults in the country who cannot work because of illness or injury. Since January 2021, the number of disabled has exploded, up over 30% in less than three years. During that time, nearly 2 million people have been added to the disability roles, reporting that they can no longer work.
Interestingly, this increase in disability occurred, for the most part, after the COVID-19 pandemic, at a time when most became vaccinated. So, while we may not yet have a handle on all of the causes for this increase in disabilities, there can be little doubt that it significantly impacts the labor market and is the likely cause of this drop in employment.
- March Payrolls rise by 236K https://www.bls.gov/news.release/archives/empsit_04072023.htm
- Revision lowered by 360K https://www.bls.gov/web/empsit/cesprelbmk.htm
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