The government recently reported that job gains between March 2023 and March 2024 had been overstated by 818,000, a breath-taking “goof” by the official bean counters. All those reports that were cheered by the Biden-Harris administration? They were as phony as a three-dollar bill.
Has the Biden-Harris White House been cooking the books, as some have claimed? Maybe, but there is another possible explanation for the significant downward revision in the jobs number — equally unflattering to the administration and its happy-talk about the economy.
Simply put, many middle-class workers have taken on multiple jobs and are struggling to make ends meet. Those extra shifts are included in the Bureau of Labor Statistics data as multiple jobs; they are, in reality, just overworked Americans trying to navigate the Biden-Harris inflation tsunami.
While it is normal for the BLS to issue modest annual revisions to the monthly jobs figures, this year’s restatement is the largest revision in 15 years, since the time when reporting was being muddled by the turmoil of the Great Recession.
Given the importance that policy-makers attach to the BLS tallies, the revision is quite alarming — and also inexcusable.
Economists have been warning that something is not right about the monthly employment reports. In June, when the government reported against all odds that 272,000 jobs had been created in May, even Fed Chairman Jay Powell expressed skepticism, saying there was the possibility the reports “may be a bit overstated.”
Last year, job numbers were revised downward (never upward) for 10 months — not a stellar record. In June 2023, for instance, instead of adding 209,000 jobs, as originally reported, it turns out the economy added only 105,000. That kind of repeated error makes people suspicious.
Those suspicions have increased as, over the last year, the job reports from the Household Survey and the Establishment Survey have moved far apart.
In the most recent month, for instance, the government’s Household Survey reported that 161.26 million civilians were employed, compared to 161.2 million in July 2023 — indicating almost no increase over year-over-year. That certainly does not jibe with reported monthly job gains of almost 242,000 on average.
In July’s Establishment Survey, however, the BLS reported that there were 158.7 million people working, up from 156.2 million the year before, for a gain of 2.5 million.
Why the discrepancy? There are always small gaps, due to differing sampling methods. The Establishment Survey includes reporting from 119,000 large and small enterprises and is considered a more accurate tally of employment trends than the household survey, since it draws from a bigger sample. On the other hand, the Household reports factor in data from some 60,000 households and include self-employed or gig-workers, unpaid family workers and other employees not counted by the establishment survey.
One reason that the jobs numbers may have been inflated is that the Household Survey counts workers only once as employed, even if those people have several jobs. In the Establishment Survey, the opposite is true. So, in an economy like today’s, where many people are having to take on multiple jobs to make ends meet, job-growth will be exaggerated by the Establishment Survey.
I’m guessing that is one reason the recent revisions are so large.
Also, the Establishment Survey uses macroeconomic analyses to estimate the number of jobs created and lost by new businesses being formed and old ones going under. This calculus has long been considered extremely error-prone. President Biden has been bragging about the number of new businesses started under his watch. Those figures may also have been exaggerated.
All of this dissecting of the employment reports may strike many Americans as “in the weeds” and not very important to their daily lives. But BLS's overly bullish view of the labor picture has probably kept the Federal Reserve from cutting interest rates. Even though the unemployment rate jumped from 3.4 percent in April 2023 to 4.3 percent last month, the Fed has sat on its hands, keeping interest rates high in order to squeeze inflation out of the system.
If you have been trying to buy a house and you find mortgage payments through the roof, then you understand why this matters.
The Fed should have known better. Many signs have pointed to a cooling labor market, including a survey from ZipRecruiter that showed job seekers in the second quarter less confident in their ability to find employment than at any time in the last two years, amid a decline of nearly 1 million in the total number of jobs available and, of course, rising unemployment.
In addition, 4.4 percent of respondents to a recent New York Fed survey reported they expected soon to become unemployed, up from 3.9 percent in July 2023. The Fed notes that the “current reading is the highest since the series started in July 2014.”
Yet the Fed has not lowered rates.
It may be that Powell is alarmed that the Biden-Harris White House continues to spend like drunken sailors, keeping our federal spending and deficits above sustainable levels, which threatens to also keep inflation above acceptable levels. In the early days of the COVID crisis, Powell led the Fed to lower rates, in an effort to prop up the economy. He exhorted Congress and the Trump White House to add fiscal stimulus to his monetary boost, and they did.
But Biden and Kamala Harris pushed spending beyond any reasonable level. This year, federal spending is predicted to reach 24.2 percent of GDP, significantly above the long-term (39 year) average of 21.1 percent; meanwhile, revenues (including taxes) are estimated to total 17.6 percent of GDP, just 0.4 percentage points above the 1984-2023 average.
Powell may be reluctant to add to that enormous ongoing stimulus by reducing interest rates. The good news about the overblown jobs reports? They have given him cover to wait. The bad news? High rates may yet push us into recession, and the phony job gains have further eroded Americans’ trust in their government.
Liz Peek is a former partner of major bracket Wall Street firm Wertheim and Company.
