One reason Americans may be less happy about the economy despite the very strong jobs reports that have been coming out month after month: those reports have been wrong.
Each month the Department of Labor estimates the number of workers on nonfarm payrolls and publishes these in its employment situation report, usually on the first Friday of the month.
The initial estimates are based on surveys of employers taken in the middle of each month. Much like an opinion poll of a few thousand likely voters can be used to project election winners, relatively small surveys are used to extrapolate the labor market for the entire country.
The reports often get revised up or down as the government gets more information about employment in a given month.
The past year was extraordinary because of the cumulative size of the revisions—and the fact that they almost always have gone in one direction.
The payrolls figures have been revised down for four consecutive months through December. In fact, in the last 11 months, they’ve been revised down 10 times.
Cumulatively, this has added up to 443,000 fewer jobs than initially reported, according to the calculations of Joe Lavorgna, a former economist in the Trump White House who is now the chief economist at SMBC Nikko Securities.
That’s the largest 11-month total since 2022, according to Lavorgna.
The final tally may be even higher because the government could still revised the November and December estimates. In fact, the December jobs number was so much higher than forecasted by analysts that it is widely expected to be revised down.
The government’s estimation of the employment situation in the U.S. has been hampered post-pandemic by a collapse in the response rate from businesses to the Department of Labor’s surveys. To continue with the analogy, it is like the challenge faced by political pollsters when people keep refusing to answer opinion survey questions. The data becomes less reliable and more work has to be done by the econometric models. Essentially, fewer responses means more guesswork.
The consistency of the overestimation of jobs figures is threatening to undermine the credibility of the Labor Department’s employment reports. Already, some on the right are starting to wonder if the numbers are being rigged to flatter the Biden economy.
“Is it all by design? The implausibility of nearly all later revisions being downward suggests so,” Matt Palumbo wrote recently on the website of the Dan Bongino show.
Joe Biden has frequently claimed, without evidence, that his top rival for the White House, former President Donald Trump, is a threat to our democracy, employing apocalyptic rhetoric that could sway some in the government to fudge numbers or policies to hinder Trump’s election chances.
