Understanding the Bureau of Labor Statistics Jobs Report
December 2, 2022
The jobs report published by the Bureau of Labor Statistics today was exceedingly strong relative to consensus. As a consequence, interest rates are rising and people fear the Fed will continue to aggressively hike rates. However, keep in mind the data didn’t seem to synchronize with what we hearing elsewhere. Remember the BLS is a survey, not an actual count. That is why you see massive revisions to it over time as BLS goes back and gets the actual data. In this survey only 49% of businesses replied. Traditionally, roughly 71% reply. Could that have caused a distortion of the data? Perhaps. My guess is that this number will ultimately get revised lower. Why do I say that? First, their own survey of households didn’t agree with the one they surveyed of business. Many people don’t realize that they actually conduct two surveys. The report that gets published is the business survey. The household survey gets relegated to the back. Interestingly, the household survey saw a decrease of 138k employed people. Maybe that is a distortion as well, but it is odd that the two surveys are so different. I tend to like actual numbers as opposed to surveys. For that reason, I focus on the data released by ADP, the largest payroll processor in the world. Their solution is used by over 800k corporations and the vast majority of the S&P 500. Their data is actual, meaning it isn’t a survey. It is an actual measurement of exactly how many workers they processed payroll for during the month. They showed a dramatic downshift relative to expectation. Additionally, the sectors where you would expect weakness, encountered it. Namely, we have been hearing a lot about technology sector layoffs. ADP showed a loss of technology jobs. By contrast, the BLS survey showed a nice uptick in tech jobs. That doesn’t make sense to me and I’m guessing it will ultimately change.
Remember the BLS is a survey, not an actual count. That is why you see massive revisions to it over time as BLS goes back and gets the actual data.
By contrast, the other data that we received today was very favorable for inflation. CarGurus reported that November used vehicle prices were down 1.8% from October. New vehicle inventory is up 7.7% m/m and +87% y/y. If you need to buy a car, sit tight. There is going to be a mountain of inventory by 1Q23 and all of those dealer add-on premiums are going to evaporate. It’s going to be back to the old days when you paid less than MSRP very soon. That will be a favorable outcome for inflation.
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