Something Is Rotten in the Latest Jobs Report

The labor market is proving to be resilient in the face of a slowing US economy. But while everyone takes a victory lap over the latest data in the April jobs report, the Bureau of Labor Statistics (BLS) revisions are capturing all of the attention. It turns out that employment gains earlier this year were less robust than what was initially reported. So, are the statisticians fudging the numbers, or were these honest mistakes and updates? Whatever the case, the errors have consequences in the broader economy and the toxic world of politics.

Stud or Dud? The April Jobs Report

Let's get down to brass tacks. The BLS reported that the US economy created 253,000 new jobs in April, up from 165,000 in March. This topped the consensus estimate of 180,000. The unemployment rate dipped to 3.4%, down from 3.5% and below economists' expectations of 3.6%. This is the lowest jobless figure since 1969. Average hourly earnings rose to 4.4% year-over-year and 0.5% month-over-month. Average weekly hours were unchanged at 34.4, while the labor force participation rate was also flat at 62.6%. Once again, about eight million people worked two or more jobs.

Employment gains were broad-based, with professional and business services leading the way (+43,000). This was followed by health care (+40,000), leisure and hospitality (+31,000), financial activities (+25,000), and government (+23,000). The other industries, from mining to construction to retail, trended sideways on the payrolls front.

Overall, the April jobs report smashed expectations. Many economists warned that this non-farm payroll data would have accounted for the post-Silicon Valley Bank turmoil and, as a result, led to much slower growth. But this was not the case, prompting Democrats to celebrate the never-ending Biden boom. As Toronto Blue Jays announcer Tom Cheek said in the 1993 World Series when Joe Carter hit that famous game-winning home run, "Touch 'em all, Joe! You'll never hit a bigger home run in your life!"

But something smelled rotten inside the latest BLS report. After scouring through the NFP data, it was found that previous job figures were revised downward at a hefty pace.

Revisions and Divergence

Typically, the BLS will revise previous job numbers by a few thousand up or down. But the April NFP report was, as the kids say, insane. The changes in total employment for February and March were revised down by 78,000 and 71,000, respectively. This means that 149,000 positions vanished in two months, and initial reporting was off by 27%. There was also a tepid downward adjustment in the January figures, too.

Members of the business media took notice. CNBC’s Rick Santelli called this a "huge drop," and Maria Bartiromo of Fox Business said the revisions "show a much slower jobs market than we thought." Indeed, it is consequential because many overlook the modifications and only gaze at the headlines.

"Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors," the BLS noted.

Meanwhile, there was another divergence between the establishment and household data in what is proving to be a sticky point for economists and market analysts who desire accuracy in the labor numbers. The household portion, which does not engage in double-counting, showed that the US economy added only 139,000 positions.

Now What?

Despite the US economy slowing down, the labor market is proving resilient. Yes, the revisions were notable, and the divergence between household and establishment widened, but employment growth continues to be robust and broad-based. This allows the Federal Reserve to maintain a hawkish attitude on tightening, provides the White House with evidence that its economic record is exceptional, and masks the problems within the marketplace, like rampant price inflation and a banking crisis.