Why Are BLS Job Counts Essential to the Market?

The recent surge in the stock market can often trigger considerable debate, especially when such movements appear to hinge on seemingly flimsy data, like job counts. A closer look at the Bureau of Labor Statistics (BLS) annual audit reveals significant discrepancies in job creation figures, raising questions about their reliability. As the economy grapples with these inconsistencies, understanding the implications for the market and the workforce becomes crucial.

Last updated: 09 September 2023 (BST)

Key Takeaways

• The BLS reported nearly one million fewer jobs created than previously estimated for the year.
• Only 43% of businesses surveyed by the BLS responded, leading to questionable data accuracy.
• The gig economy complicates traditional definitions of employment.
• Historical patterns suggest potential for significant market rebounds following economic crises.
• Participation rates among prime-age males have declined sharply since the pandemic.

The Current Market Landscape

On Friday, September 5th, the stock market reached new heights, prompting some analysts to question the stability and accuracy of the data that fuelled such enthusiasm. This spike followed the release of job numbers that many consider to be premature or inflated. Federal Reserve Chair Jerome Powell has repeatedly emphasised that economic decisions are “data dependent,” yet the reliability of this data is increasingly under scrutiny.

The BLS Job Count Audit: A Closer Examination

On September 9, the BLS published its annual audit of job creation figures, revealing a staggering 911,000 fewer jobs created than previously reported from April 2024 to March 2025. Originally, the monthly average was estimated at +146,000 jobs, but after the audit, the average dropped to 70,000 jobs per month, reflecting a reduction of 76,000 jobs each month—a decline of over 50%.

Long-term Inaccuracies and Trends

Since 2022, the BLS has reported nearly three million fictitious jobs, primarily during the Biden administration. This raises concerns about the accuracy of employment statistics and the methods used to compile them. The BLS surveys approximately 650,000 businesses each month, which represents only about 2% of the total 33 million businesses in the U.S. With a response rate plummeting to just 43%, this means that only around 280,000 businesses provide data, resulting in a self-selected response rate of under 1% of all U.S. businesses.

When businesses fail to respond, the BLS resorts to making “intuitive” estimates, which many critics argue is akin to guesswork rather than scientific analysis. This raises a pivotal question: How can we rely on data that may not accurately reflect the employment landscape, especially in the context of the evolving gig economy and off-the-books work?

The Impact of the Gig Economy on Employment Data

Defining a “job” has become increasingly complex in an era marked by the gig economy, where traditional employment structures are being replaced by freelance and contract work. This shift complicates the BLS’s ability to accurately count jobs, as many gig workers may not be captured in conventional employment surveys.

Moreover, the pandemic has altered work-life dynamics significantly. Many employees who were once compelled to work in offices now have the option to work from home, which reduces costs associated with commuting and office space. This shift presents both opportunities and challenges for businesses trying to attract talent back to traditional work environments.

Labour Participation Rates: A Declining Trend

Historically, from the 1850s to the 1950s, approximately 87% of prime working-age men were employed or actively seeking work. Today, that figure has dropped to 67%. The decline can be attributed to several factors, including:

1. Increased disability claims and substance dependency.
2. Greater incentives for not working compared to traditional employment.
3. Alternative lifestyle choices that allow individuals to live without traditional employment.

The Lessons from Economic History

The current economic landscape bears a striking resemblance to periods of upheaval in the past, particularly the Roaring Twenties. Just as the 1920s began with a series of calamities, including a major depression and a global pandemic, today’s market is navigating the aftershocks of COVID-19 and subsequent lockdowns. The market's ability to rebound quickly after crises has historical precedent, raising the question of whether we are on the cusp of a similar economic surge in the late 2020s.

Historical Parallels: The Roaring Twenties

During the Roaring Twenties, technological advancements spurred significant economic growth. The era saw the emergence of the automobile industry, radio technology, and the advent of talking films. Just as these innovations transformed society in the 1920s, today’s technological advancements, particularly in digital and remote work, could similarly reshape the economy.

However, the decade also began with a significant market crash, just as today’s market has responded to a series of shocks, including the COVID-19 pandemic and geopolitical tensions. The Dow Jones Industrial Average fell sharply in late 1920, only to rebound sharply in the following years, emphasising the potential for recovery in the current economic climate.

The Future of Work and Employment

As we look to the future, the question remains: How will these trends impact the labour market and the economy moving forward? Employers are increasingly faced with the challenge of enticing workers back to the office, while many employees are resistant to such demands. This push-pull dynamic is creating a unique labour market landscape that businesses must navigate carefully.

Moreover, with participation rates among prime-age males at a historic low, there is a pressing need for a cultural shift that encourages a return to work. The economic implications of declining participation rates are significant, especially as we face a potential shortage of workers in various sectors.

Conclusion

The interplay between job statistics, market movements, and the evolving definition of work is complex. As the BLS grapples with inaccuracies in job reporting, the implications for policymakers and businesses are profound. Understanding these dynamics will be crucial as we navigate the future of work in an increasingly unpredictable economic landscape. Will we witness a new Roaring Twenties, or are we on the brink of another downturn? Only time will tell.

#JobMarket #BLS #EconomicTrends

FAQs

What is the BLS and its role in job reporting?

The Bureau of Labor Statistics (BLS) is a U.S. government agency responsible for collecting and analysing economic data, including employment figures. Its reports help inform policymakers and the public about the state of the economy.

Why are BLS job numbers often considered inaccurate?

Critics argue that BLS job numbers can be inaccurate due to low response rates from surveyed businesses and the reliance on intuitive estimates when data is lacking. This can lead to significant discrepancies in reported job creation figures.

What factors contribute to declining labour participation rates?

Declining labour participation rates can be attributed to several factors, including increasing disability claims, drug addiction, and alternative lifestyle choices that provide income without traditional employment.

How does the gig economy affect job counts?

The gig economy complicates job counting because many gig workers may not be captured in traditional employment surveys, leading to potential underreporting of job creation and employment statistics.

What historical events mirror today’s economic challenges?

Historical events such as the economic upheaval of the 1920s, which began with a depression and a pandemic, mirror today’s challenges, suggesting that we may be on the brink of a significant economic transformation.