Messy 2021 jobs reports take toll on Joe Biden
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U.S. president Joe Biden speaks in Statuary Hall at the U.S. Capitol, during an event commemorating the anniversary of the Jan 6, 2021 attack against the U.S. Capitol, which was organized by supporters of Donald Trump. Washington, D.C., U.S., January 6, 20,22.
Drew Angerer | Reuters
It would be a mistake to say the Labor Department’s monthly jobs report is essential.
This data includes monthly job creation and the official measure for national unemployment. It shapes economic forecasts. The data can also be used as an indicator of political power, providing instant reports on whether a U.S. President’s economic plan has been successful or unsuccessful. It is able to change consumer behavior in the immediate term. However, it cannot influence voters for more than two years.
The emphasis on the monthly update is based on an assumption that accurate numbers are provided by the government.
The Covid-19 pandemic is making the Bureau of Labor Statistics’ work harder and the accuracy of its first monthly reports far less reliable. In November, President Joe Biden will have celebrated a year of his office.
BLS Blues
Labor Department surveyors were unable to count job creation between 2020-2021. Biden has seen first figures. Most Americans can see the same. that often understate the true job growth.
Up to 2021, the Labor Department has published an average monthly revise of its jobs report. This number is over 100,000. This number could be adjusted as the government has yet to publish a final update on November or December revisions.
This figure, if it holds, would be the largest miss in nonfarm payrolls estimates for at least 40 year, even after adjustment for growth in the U.S. workforce, as a CNBC analysis by the BLS data showed.
Even more striking is the effect of these revisions on time.
If the U.S. had added the same number of jobs from January to October, it would have created 4.9 millions jobs during the first ten months of 2021. Data after revisions show that the U.S. has actually created 6 million new jobs in those 10 months.
CNBC did not include November or December in the calculations because the BLS had not yet published final revisions. Labor Department initially forecast job gains in November and December of 249,000 and 199,000 for these months. The 2021 total would rise to more than 6.4 millions jobs.
In particular months 2021, these revisions are even more striking.
In January 2021 the Labor Department published employment data. The Labor Department only reported a month-overmonth increase in net jobs creation of 49,000. The government revised January employment figures for 2021 to show a gain of 233,000 jobs. This is more than four times the initial reading.
A similar event occurred the following month. In February 2021, the Bureau of Labor Statistics reported that U.S. employers had added 379,000 jobs. The BLS later revised this number to 536,000. Most people who saw the original jobs report in February 2021 were disappointed that it was only 157,000 more than what they actually had.
In an email, Tyler Downing, senior economist at Labor Department’s Division of Current Employment Statistics said that people often believe preliminary data are “wrong”, because government revises them later.
His reply was “Non, we did not get it wrong, according to what our sample said.” Each publication’s estimates are accurate according to the data received.
Downing stated that 2021 was the year when the BLS saw its lowest rate of data collection, with the preliminary report being released every Friday. Data collection was made more difficult by the economic recovery after the pandemic. It’s not known what caused this.
Labor Department used a lower pool of data to base its 2021 jobs reports. This meant the estimates were less accurate than expected. The annual average collection rate came in at 69.8% of the total number of businesses sampled. It was last at this low in 2008
The Division of Current Employment Statistics typically has an average collection rate of over 90% by the final release.
Downing stated that the collection rates for preliminary estimates has risen to an average of 65.0 percent by 2003 and 73.5 percent by 2020. There will always be some lag in the processing of payrolls for businesses that don’t have them fully processed.
Not-so-great expectations
Washington wouldn’t have to worry as much about the understated reports or subsequent revisions if Wall Street wasn’t so focused on forecasts by economists before the jobs report. Biden could face consequences if the report is not in line with expectations.
CNBC is one of many news media outlets that cites surveys done by economists before the official Labor Department release. This helps journalists set expectations for job growth, and provides insight into Wall Street’s outlook since traders often buy or sell according to their view of the U.S. economic situation.
However, the economic pandemic is also having a negative impact on the methods economists use for forecasting payroll growth. For years, economists from both the private and government sectors have adjusted job numbers to reflect the seasons.
Even in the best times forecasters can’t predict human behavior. However, adding in a pandemic has thrown off even the most basic models of human behavior. This includes indoor eating patterns and travel habits as well as compliance to health advisory. Wall Street’s economics models — like those at the Labor Department — have become less accurate as a result.
Dow Jones polled economists in early last year and found that they anticipated the U.S. to create 50,000 new jobs by January 2021. After making revisions, it came out to 233,000.
These same economists predicted that there would be a rise of 210,000 jobs ahead of the February report. The final print at 536,000 was 326,000 below their estimate.
CNBC analysed the data and found that the Dow Jones group of economists’ monthly average projection fell 254,000 jobs below the 2021 final revisions.
In recent years, the gap between final estimates and actual numbers has become much smaller. The difference between the economist’s expectations and final numbers for monthly job growth in 2017 was just 30,000 jobs. This is less than a tenth of the number last year.
Seventeen of 12 initial Labor Department jobs reports in 2021 were below or “missed” Dow Jones expectations.
It’s a uphill struggle
Biden’s administration has faced a difficult reality due to the combination of less reliable initial data from government and more accurate forecasts by economists.
When the monthly employment reports for June are out, there have been harsh headlines about the White House. Then the voters seem not to give Biden credit for the huge revisions made weeks later.
According to A.A., 58% disapprove that Biden has handled the U.S. jobs market. CNBC/Change Research pollThis article was published in April. This is worse than the overall views of Americans on the U.S. employment market: 52% of respondents said that they consider the U.S. current job market to be either poor or not so good.
60% of 1,895 survey respondents disapproved of Biden’s economic handling, which is a 6-percentage point decline in approval since September.
Political analysts believe that the President’s declining polling numbers indicate Democrats may face an uncertain election cycle in 2022. Many have pointed out that Republican Glenn Youngkin won over Democrat Terry McAuliffe, in Virginia’s November gubernatorial election as proof that the GOP could win control of Congress.
This is noteworthy because Biden took Virginia by 10 points in 2020.
Biden is likely to have a difficult year, according to history. The president’s party loses most seats at the first midterm following their win. Poor approval of his handling of the job market — combined with inflation running at its highest levels in decades — likely will not help.
According to the Labor Department, the December 2021 national unemployment rate was below 4%. There were 199,000 new jobs last month. This is the first time the Labor Department has looked at the U.S. job market. Although any number recently reported must be considered within the context an economic recovery when businesses add jobs more rapidly, looking at pre-Covid trends suggests December was a strong job month.
In 2017, the average nonfarm payrolls growth was 181,000. This number rose to 193,000 in 2018, and fell to 168,000 in 2019.
According to the majority of economists, a low unemployment rate (less than 4%) is strong evidence that America’s labor market is near full employment.
Economics isn’t politics, however. Republicans capitalized on the gap between the numbers The number of jobs that were added to Friday’s data was higher than the expectations.
Ted Cruz (R-Texas) wrote on Twitter that Friday’s latest jobs report wasn’t just disappointing in December, but it was Biden’s worst yet.
The House Republican conference specifically referred to media coverage of the report’s failure to meet Wall Street expectations.
“President Biden has just received the worst job report in his presidency since December. American workers are unable to afford “another big missed” by this administration,” says a House Republican tweet account.
The majority of Democrats in Congress is razor thin. Split 50-50, the Senate is divided between all parties. The House has a slim 221-212 edge in favor of the Democrats.
As Democrats face the threat of losing control of Congress — and their ability to pass Biden’s economic agenda — the White House has tried to counter the souring opinion on the job market and economy.
Cecilia Rouse is the Chair of Council of Economic Advisers and has been a consistent critic of larger than average fluctuations in job reports. After the December jobs report, which was not impressive in the first place, Rouse published a blog posting that highlighted the issue.
Rouse stated that “jobs numbers are usually revised twice before being considered fairly ‘final.’ The Administration emphasizes that monthly unemployment and employment figures are volatile and can subject to significant revision.
— Nate Rattner from CNBC contributed to this report.
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