December Jobs Report’s Real Numbers Are Anemic Not Robust. Here’s Why Americans Should Be Wary

COMMENTARY Jobs and Labor

December Jobs Report’s Real Numbers Are Anemic Not Robust. Here’s Why Americans Should Be Wary

Jan 9, 2023 4 min read
COMMENTARY BY
EJ Antoni

Research Fellow, Regional Economics

EJ is a research fellow for Regional Economics in the Center for Data Analysis at The Heritage Foundation.
U.S. President Joe Biden speaks during a cabinet meeting in the Cabinet Room of the White House January 5, 2023 in Washington, D.C. Drew Angerer / Getty Images

Key Takeaways

Businesses are not responding to these Labor Department surveys at anywhere near the rates they were before the pandemic.

The unemployment rate is artificially low because the labor force is significantly below its pre-pandemic trend.

This administration seems much more concerned with cherry-picking favorable statistics than the state of the economy or American families’ finances. 

It’s a new year, a new month, and a new round of misleading statistics from the Biden administration. While the White House was quick to tout the December jobs report as a success story, there is little to celebrate. Their upbeat claims are based on increasingly questionable data.

The first red flag comes from the differences in the two surveys used to compile the jobs report: an establishment survey of businesses, and a survey of households. 

The headline number of 223,000 jobs added in December comes from the establishment survey, while the headline unemployment rate of 3.5 percent comes from the household survey. Both have their own measure of employment but they tend to move roughly in sync with one another over time. In 2021, however, they diverged sharply.

Since March, that divergence has been 2 million jobs. Why the sudden deviation? Perhaps there’s a problem with the surveys themselves.

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Businesses are not responding to these Labor Department surveys at anywhere near the rates they were before the pandemic. The establishment survey, for example, has lost a quarter of the businesses responding pre-pandemic; the response rate is down to just 44.8 percent. How much faith should we put in this data?

The Labor Department’s statistic of 10.5 million job openings, should be viewed warily, too. That survey’s response rate has plummeted to just 30.6 percent. When more than two of every three businesses fail to respond, the data may be significantly biased.

Meanwhile, the household survey—which shows less than half a million jobs added since pre-pandemic levels—has had a relatively steady response rate near 75 percent. That should carry considerable weight when economists attempt to evaluate the economy’s health.

And that health might best be described as anemic. While the establishment survey showed 223,000 jobs added in December, there is likely significant double counting of jobs. Approximately 939,000 of the jobs added since May were not additional people employed, but the same people being counted twice.

This can occur when a person who is already employed takes a second job, perhaps to cover the higher cost of living from inflation. It can also occur when someone who was previously self-employed goes to work for another business, because unincorporated self-employment is not counted in the headline jobs number. In either case, someone who was already employed ends up adding to the number of new jobs.

But there are more disturbing trends present in the data. The economy has been losing full-time jobs at an alarming rate: 2,100 every day since May. Employers are shifting from full-time to part-time jobs, which often occurs before those businesses stop hiring altogether. Then, layoffs arrive.

December’s jobs report was not all bad news. It was actually better than November’s report in a few areas. For example, the labor force grew as more people looked for work, and the household survey showed jobs were added. But the labor force is still far below what could be considered normal levels.

Rachel Greszler, a senior fellow at The Heritage Foundation, has calculated that employment today is still down 2.8 million compared to pre-pandemic employment rates. The unemployment rate is artificially low because the labor force is significantly below its pre-pandemic trend. The percentage of the population actually working has been flat since March 2022 and has never recovered to where it was before the government-imposed shutdowns of early 2020.

For those who are working, there is more bad news on earnings, which grew less than expected in December while previous months were revised down. The result is that average earnings grew an anemic 3.1 percent in 2022, while inflation was more than double that. If you got a 3 percent raise in 2022, you lost purchasing power.

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Wages were not the only thing revised downward in this jobs report. The Labor Department now estimates employment for the year at 826,000 less than previously reported.

Seasonally adjusting data and annual revisions are part of normal operating procedure at the Bureau of Labor Statistics. Predictable variations, like extra retail hiring during the holidays, followed by those workers being terminated in January, are estimated and removed from the data, which allows for one month to be compared to another. But, in 2021, the seasonal adjustments were abnormally high earlier in the year.

In short, the Department of Labor effectively front-loaded job and earnings growth in 2021, which made the number of jobs and earnings look larger than they really were. If these revisions were included as part of the monthly change in the December jobs report, the change in employment would be negative, not positive.

Yet the White House wasted no time declaring victory and laying claim to "the two strongest years of job growth in history"—a dubious assertion. During Biden’s first two years in office, jobs are up by 10.7 million, compared to the economic recovery under Trump which added 12.5 million jobs in less than half the time.

This administration seems much more concerned with cherry-picking favorable statistics than the state of the economy or American families’ finances.

As new orders for businesses continue collapsing, hiring will keep slowing—that makes for glum conditions as we start the New Year. 

This piece originally appeared in Fox Business