Below is a simple chart of jobs report vs revisions by month.
The October jobs report was catastrophic, with only 51,000 government jobs (often considered not “real” jobs) and 89,000 education and health services jobs out of the 150,000 reported as created. Additionally, manufacturing jobs saw a significant drop. The birth/death model added 412,000 fictitious jobs, further distorting the picture. Overall, this report signals deteriorating labor market conditions and suggests a potential rate cut by the Federal Reserve in the coming months.
With expectations of a significant drop from September’s 336,000 new jobs, the consensus forecast was 180,000, falling short of the rumored 211,000. However, the Bureau of Labor Statistics (BLS) confirmed that the previous month’s surge was misleading. As reported, the October report plummeted to 150,000, marking a more than 50% decrease from September, making it the second-lowest figure since 2022.
Historical data was substantially revised downward, with August’s job change reduced by 62,000, from +227,000 to +165,000, and September’s change lowered by 39,000, from +336,000 to +297,000. This led to a combined 101,000 fewer jobs than initially reported for August and September. This pattern of significant downward revisions has continued for eight of the past nine months, indicating a tendency toward political manipulation to initially portray economic strength.
The troubling aspect was not just the establishment survey but also the household survey, where the number of employed workers dropped by 348,000, the largest decrease since the early days of the COVID-19 pandemic. This suggests that the United States may already be in a recession.
The unemployment rate rose from 3.8% to 3.9%, contrary to expectations of an unchanged rate. The underemployment rate (U-6) also increased to 7.2%, the highest since February 2022, indicating a broader measure of unemployment.
Wage growth in October was a mere 0.2%, down from the revised 0.3% in September and below the estimated 0.3%. On an annual basis, wage growth was 4.1%, lower than the previous month’s 4.3%.
Looking at specific job sectors, health care added 58,000 jobs, government employment increased by 51,000 (more than a third of the reported jobs), and social assistance added 19,000. However, manufacturing saw a decline of 35,000 jobs, largely due to strike activity in motor vehicle production. Leisure and hospitality employment remained mostly unchanged, and professional and business services showed little net change since May.
Household survey shows employment collapsed by 348K, the biggest drop since the Covid shutdown.
Opinion: It’s almost certain the US is already in recession.
I believe that the true indicator of economic health is somewhat obscured by the way surveys are conducted. For instance, when we see reports of 308,000 jobs added, it can be misleading, especially when we consider that 300,000 full-time jobs were lost and 608,000 part-time minimum wage jobs were added. This makes it difficult to grasp the seriousness of the situation.
With prices on the rise, the housing market at record highs with high-interest rates, and ongoing conflicts, it’s hard for me to deny that we might be in the midst of a recession. However, I’ve always found it challenging to define inflation or a recession in a way that everyone can agree upon. Some argue that the current situation doesn’t meet the criteria for a recession, citing factors like the Q3 GDP growth of almost 5% and low unemployment.
But, I personally look at the economy from a different perspective. I gauge it by our ability to produce and the level of productivity we maintain. Despite the significant increase in the money supply, with 40% of all dollars printed in the past three years, it’s interesting to note that we still observe a 5% growth in the metric used to measure economic activity. To me, what matters is our capacity to produce, and in that respect, we seem to be doing well. This doesn’t change the fact that we’ve printed a substantial amount of money, but it also doesn’t negate the level of output we’re achieving.
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