down memory lane
I haven’t written about the BLS situation reports for years. They were certainly very important during the climb out of the mortgage lending crisis of 2006-08. The main issue back then was that mortgage originators wrote massive amounts of dud mortgage loans, whose poor quality was disguised through opaque financial engineering, concerted looking-the-other-way by the rating agencies and, in my view, outright fraud in some cases. Toxic bundles of these entities were eventually sold in large amounts to the ultimate dumb money, Continental European banks. In the mean time, many too-trusting individual borrowers found themselves unable to keep up with mortgage payments and lost their homes. When the music finally stopped, financial institutions, which had retained many of these mortgages in their portfolios, were also facing bankruptcy.
Really bad stuff.
No one, though, as far as I’m aware, suggested fudging the high unemployment numbers that the BLS reported for a long time during the ensuing recession.
fast forward to today’s BLS figures
background stuff
The BLS establishment report is compiled from data supplied to Washington by a large group of employers. The data don’t come in all at once, so a preliminary number comes out initially, but is subject to revision over the following two months–as more data come in.
The monthly establishment report has a margin of error of +/- 300,000. Sounds like a lot, but that’s mostly because the domestic workforce is 50,000,000+. So it’s +/- 0.6%. All clearly disclosed in the government reporting. Belaboring the point, a result reported as, say, +100,000 new jobs really is shorthand for -200,000/+400,000. Again, anyone who uses the reports understands this.
The initial figures are revised in each of the two months following the initial estimate–again stuff clearly disclosed in the report documents.
The largest negative force in recent BLS reporting is apparently the Trump administration, which has offered severance packages accepted by 154,000 workers so far since the inauguration.
So…
..today, the BLS announced its August report. It indicates that about 80,000 Federal workers have been laid off, year to date, a figure that does not include the 154,000 who have received severance packages. which would bring total Trump administration layoffs close to a quarter-million.
The BLS estimates that 12,000 federal government workers were laid off last month. Nevertheless, the economy gained a total of +73,000 new jobs.
At the same time, however, employment gains for May have been revised down from +144,000 new jobs to +19,000, and for June from +147,000 to +14,000. Both revised figures are well within the margin of error for the report (I don’t know enough about the current BLS setup, but maybe good news flows faster than bad).
It’s hard to know what role ICE plays in all of this. Prior to Trump, ICE was deporting about 20,000 people per month. Presumably, that figure has gone up. It’s not clear how many were workers, though.
Just to fool around with numbers, if we think the administration is laying off 30,000 federal workers per month and ICE is deporting another, say, 25,000, and if we say that only half of the latter are shown in official workforce numbers, that’s about half a million workers annually Trump is removing from the workforce.
If so, why, then, should it be a surprise that we sometimes get downward revisions in the size of additions to the workforce? And that’s not factoring in anything for the effect of tariffs–or the fact that the tariff playbook seems to be changing by the day. Both the latter are arguments for not hiring anyone until the economic picture is clearer.
the Trump reaction to recent revisions?
…a tirade and shoot the messenger.
If I had a portfolio manager colleague whom I saw yelling at a computer screen telling a given stock to go up, the least I’d do is return to my desk and quietly take my money (if any) out of his hands.
This is a lot worse, both in behavior and in what it says about his cognitive inability to analyze and solve problems.