Government Job Figures – The Ugly Truth Behind the Questionable Data

By Preserve Gold Research

Recent reports of rosy government employment figures have led some economists to question the accuracy of the data. In its latest report, the Bureau of Labor Statistics (BLS) unveiled fresh job data earlier this month. The findings revealed a surge in seasonally adjusted total nonfarm jobs, with an impressive increase of 339,000 positions in May—surpassing expectations by a wide margin.

Mainstream news outlets have eagerly latched onto the numbers as proof of the “remarkable resilience of President Joe Biden’s economy,” as Politico put it. But while the news has been met with resounding enthusiasm on Wall Street, a closer examination of the numbers paints a less optimistic picture. Behind the encouraging headline figures, there lies a far less encouraging reality—one that speaks to the challenges faced by Biden’s economy.


Assessing the Current State of the Economy

Separating fact from fiction has grown increasingly difficult in today’s polarized climate with the media and politicians spinning figures to support their own agendas. On the surface, the job market appears to be “sizzling”, as NPR and other outlets have boasted. But the devil is in the details, and beneath the glossy figures spouted by government officials lies a more sobering truth.

White House officials have pointed to a strong recovery in labor market conditions, citing the latest employment numbers as evidence that the Biden economic plan is working. But with nearly every other economic indicator still in the red, the BLS’ job figures are at odds with the rest of the data.

The growth rate of Gross Domestic Product (GDP) in the first quarter slowed to 1.1%, coming in far below economists’ expectations. The manufacturing industry saw its slowest growth in nearly three years in March with the Philadelphia Fed Manufacturing Index deeply in negative territory. The housing market has cooled off, with existing home sales dropping for the third consecutive month in April. Real consumer spending has pulled back, with the Personal Consumption Expenditures (PCE) Index down since the start of the year. And that’s just the tip of the iceberg.

Key recession indicators point to an even bleaker picture. The Conference Board’s Leading Economic Index (LEI), a widely-used gauge of economic activity, “has declined in each of the last 14 months and continues to point to weaker economic activity ahead,” said Justyna Zabinska-La Monica, Senior Manager, at The Conference Board. “Rising interest rates paired with persistent inflation will continue to further dampen economic activity,” she added. Meanwhile, temp employment, which historically leads economic activity, has plummeted and the yield curve’s inversion has deepenedboth warning signs of a possible recession in the near term.

Reconciling the conflicting data has become a major headache for economists who must holistically assess the health of the economy. “This is the strangest employment report for some time… [R]ight now the data suggest that economic growth is stronger than is indicated by most other monthly data, said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “The downward trend in job growth since the summer of 2021 now appears to have flattened-off, though that could change with revisions,” he added.

The discrepancy between the headline-grabbing job figures and the rest of the economic data suggests the overall state of the US economy is far from rosy, despite the media’s positive spin. A deeper dive into the BLS data helps to illustrate why.


A Tale of Two Economies

A closer look at the job numbers reveals a more nuanced assessment of the state of the labor market with the Household Survey painting a starkly different picture than the Establishment Survey. The Household Survey, which surveys people to produce the unemployment rate, showed a month-over-month decline of 310,000 people employed in May. The Establishment Survey, which surveys businesses and produces the jobs number, showed a month-over-month increase of 339,00 million people employed in May.

The widening divergence between the two surveys suggests two distinct economies—an economy in which the number of employed people is shrinking, and an economy in which businesses are creating jobs. According to economists, the divergence could be due to a variety of factors, including sectoral shifts in the labor market, misclassification issues with businesses reporting employees as independent contractors, and seasonal adjustment issues.

Others, like Ryan McMaken, executive editor at the Mises Institute, point to the response rates of the two surveys as a possible culprit. “Part of this growing gap may be due to the fact that the number of responses to the Establishment survey has dropped off in recent years, suggesting that the survey is waning in its reliability as an indicator of the overall economy,” said McMaken. “The Household Survey, meanwhile, has not seen as large a drop off in responses,” he added.

The diverging trends between the two surveys have economists questioning the veracity of the headline employment figures and warning of potential dangers in the future. “The bigger-than-expected 339,000 increase in non-farm payroll employment in May will dominate the headlines, but the employment report was not all positive — with a big drop in the household survey measure of employment driving the unemployment rate up to a seven-month high of 3.7% and average weekly hours worked edging down to a three-year low,” said Paul Ashworth, chief North America economist with Capital Economics.

Ashworth isn’t the only one sounding the alarm either. “We continue to anticipate a deterioration in labor market conditions in coming months featuring hiring freezes, strategic resizing decisions, and wage growth compression,” said Lydia Boussour, senior economist with Earnst & Young.

The true state of the economy remains murky with conflicting data and diverging trends muddying the waters. While the headline-grabbing job figures may appear to be “sizzling”, the focus has been almost exclusively on the Establishment Survey, ignoring the realities of the Household Survey. This duality and the bifurcation it has created in the labor market have economists concerned that the US economy is far from out of the woods.


Employment – The Final Bastion?

The labor market has been the final bastion of strength in an otherwise bleak economic landscape so far this year. But with the divergence between the two surveys and concerns about the fragility of the labor market growing among economists, it remains to be seen how long the labor market can remain strong in the face of a weakening economy.

As economists continue to grapple with the disconnect between the headline jobs figures and the rest of the economic data, the threat of a recession looms largeFor Americans concerned about the true state of the economy, experts advise diversifying savings into historically stable instruments like precious metals to help protect themselves from the uncertain times ahead. The gold and silver markets have already been on a tear this year, with prices of both metals rising sharply as investors look to defensive assets to protect their savings. Only time will tell if the labor market can remain strong in the face of an economic slowdown, but the conflicting data and diverging trends suggest caution is warranted.

Are you concerned about a weakening economy?


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