New government data shows the economy could be losing jobs

The stagflationary first-quarter GDP report from the Bureau of Economic Analysis got a lot of attention, but the Bureau of Labor Statistics recently dropped a big bombshell that no one noticed.

The economy may be losing jobs, not adding them.

The BLS provides monthly estimates of the number of nonfarm payrolls nationwide from a survey of more than 600,000 businesses. According to those data, wages rose by 640,000 in the third quarter of last year.

But now, the BLS has released its Business Employment Dynamics, or BED, report for the same period, and it shows a drop in private payrolls of 192,000. This is a huge difference of 832,000 between July, August and September.

This expression raises two questions: What is the cause of this disparity, and which criterion to rely on?

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First, the two statements calculate slightly different things. The monthly jobs estimates published by the BLS are the number of nonfarm payrolls, which exclude the agricultural sector but include government employees.

In contrast, the quarterly BED report counts wages at 9.1 million private businesses, so it excludes government employees.

Despite their differences, the two reports have a tremendous amount of overlap in what they are trying to assess, which is why they are generally close over time. The recent difference between them is quite extraordinary.

Although government payrolls rose sharply in the third quarter of last year, they rose by 146,000 in those three months, less than a fifth of the difference between the two reports from the BLS.

Notably, the BED report comes from the Quarterly Census of Employment and Wages, which covers more than 95% of jobs in the U.S. and covers about 12 million businesses. This is 17 times the sample size of the dataset used to compile the monthly estimate of nonfarm payrolls.

Not only does BED have a large number of legislation on its side, but there were two red flags in last year’s monthly job estimates.

At first, almost all of them were edited. While revisions are a constant operational process, their direction is inconsistent. However, repeated downward corrections are more consistent with economic downturns, as happened in the Great Depression.

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Second, there is an unprecedented disparity between the two datasets used to compile the monthly employment status published by the BLS, the Survey of Businesses and the Survey of Households. The household survey showed net job losses since last August, in stark contrast to the 1.7 million job gains shown in the establishment survey.

These facts indicate that the BED report may be a better indicator of how many jobs the economy is adding or losing.

Additionally, labor market weakness sounded by the BED report should have started ringing alarm bells in January. That’s when second-quarter data became available, showing private wages rising about half as much as the monthly jobs report showed, even after those monthly figures had already been revised down sharply from their initial readings.

Many pundits are puzzled as to why polling data shows negative views of the economy when so much job creation is happening. If the latter is false and jobs are lost, it certainly helps explain the former.