Messy 2021 job reports, unreliable job data overshadow Joe Biden

Messy 2021 job reports, unreliable job data overshadow Joe Biden

US President Joe Biden makes remarks in the Statues Hall of the US Capitol Building during the commemoration of the first anniversary of the January 6, 2021 attack on the US Capitol by supporters of former President Donald Trump in Washington, DC, US, January 6, 2022.

Drew Angerer | Reuters

To say that the US Department of Labor’s jobs reports are significant is to downplay what many observers consider to be an important economic barometer.

This data, which includes the official measure of national unemployment and monthly job creation, shapes the economic outlook. But it also serves as a powerful political measure, an instant report card on the success or failure of an American president’s economic plan. It can influence consumer attitudes in the short term and influence voters in election years.

The assumption that the government provides accurate numbers supports the focus on the monthly update.

But the now protracted COVID-19 pandemic makes the task of collecting reliable numbers more difficult — and less reflective of the final count after revisions than it was in pre-pandemic times.

That is, President Biden, who will celebrate his birthday on January 20, has paid a political price for what was seen as a “false forecast” that appears to have helped stoke voter anger over his handling of the economy as Democrats try to take control. Congress in the November midterm elections.

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During the pandemic years of 2020 and 2021, Labor Department watchdogs struggled to calculate job opportunities. Biden and most Americans saw raw monthly numbers in those years that often understate real job growth.

The average monthly review of the Labor Department’s jobs report has exceeded 100,000 so far for 2021. That number may change, as the government has not published a final update of the November and December reviews.

If that number holds, it represents the largest gap in nonfarm payroll estimates in at least 40 years, even when adjusted for labor force growth, according to a CNBC analysis of Bureau of Labor Statistics data.

The impact of these revisions over time appears to be more profound.

If the economy added as many jobs as was first reported between January and October in 2021, the US would have recorded 4.9 million jobs during that period. After the revisions, the data shows that the US has already added 6 million jobs.

CNBC excluded the months of November and December from the calculation because the BLS did not publish its final reviews of those months. The Department of Labor initially forecast job gains of 249,000 and 199,000, respectively, for those months. This would make the 2021 total of more than 6.4 million jobs.

The revisions appeared sharper in specific months of 2021.

When the Labor Department first reported employment figures for last January, the net total on a monthly basis was just 49,000 jobs. After the revisions, the government said January’s gains came to 233,000 jobs, more than four times the original reading.

Something similar happened the following month. The BLS first said that US employers added 379,000 jobs in February 2021. Weeks later, the BLS revised that number up to 536,000, meaning that most people who read the initial jobs report saw a figure of 157,000 jobs below the final total.

Tyler Downing, chief economist for the Department of Labor’s Current Employment Statistics Division, said in an email that people often mistakenly believe raw data is “wrong” because the government reviews it later.

“No, we got it right, based on what the sample told us,” he wrote. “In each publication, estimates are accurate based on the sample received and the calculation of seasonal adjustment factors.”

Downing added that the BLS in 2021 saw one of the lowest rates of data collection for its first preliminary release, or report released on the first Friday of every month. It’s not clear exactly what has made data collection more difficult during the economic recovery from the pandemic this year.

The Labor Department based its 2021 job reports on a smaller-than-normal data set, which means that the first estimate lacks the usual accuracy. The average annual collection rate was 69.8% of the total number of companies included in the sample. The last time this rate was low was in 2008.

By the third and final release, the current employment statistics department usually has a attainment rate above 90%.

“Accomplishment rates for initial preliminary assessments increased from an average of 65.0 percent in 2003 to 73.5 percent in 2020,” Downing wrote. “However, there will always be a lag with some companies, simply because their payroll is not fully processed.”

Expectations are not great

The watered-down reports and subsequent revisions won’t be a problem in Washington if Wall Street doesn’t focus too much attention on the outlook for economists ahead of the jobs report. These “missed expectations” during the months of the pandemic could hurt Biden and his party at the polls this year.

Dozens of news media, including CNBC, cite surveys of economists in stories published before the Labor Department’s official release. Doing so helps reporters determine readers’ expectations of job growth and gives them insight into what to expect Wall Street as many traders are buying and selling based on their expectations for the broader US economy.

But the pandemic has also undermined models that economists use to predict salary growth.

Economists in government and the private sector for years have adjusted job numbers based on the season — and even in the best of times, forecasters have a hard time predicting human behavior.

But adding a pandemic to the mix has upended even the most modest models of human behavior, from indoor travel and dining patterns to adherence to public health guidelines. As a result, Wall Street economic models — such as those at the Department of Labor — are becoming less accurate.

Early last year, economists polled by Dow Jones said they expected the US economy to add 50,000 jobs in January 2021. But the number after revisions came to 233,000.

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Ahead of the February report, those same economists had predicted an increase of 210,000 jobs. Their estimate of 326,000 fell below the final edition of 536,000.

The median monthly forecast from a group of Dow Jones economists fell 254,000 jobs per month below the final revised numbers in 2021, according to CNBC’s analysis of the numbers.

The gap between estimates and final figures has been much narrower in recent years. For example, in 2017, the average difference between economists’ forecasts for monthly job growth and the final revised numbers was only 30,000 jobs, only about 11% of last year’s total.

Of the 12 preliminary Department of Labor jobs reports in 2021, seven were not Dow Jones forecasts.

uphill battle

The combination of the noisier initial government data and less accurate forecasts from economists contributed to the difficult reality of the Biden administration.

The White House has tended to grapple with harsh headlines on days when monthly jobs reports of “disruptive expectations”. Then, when the big revisions come weeks later, Biden doesn’t reap much benefit in voter perception.

About 58% of voters say they disagree with how Biden has handled the US job market, according to a CNBC/Change Research poll published earlier this month. This is worse than their views of the labor market in general: 52% of those surveyed said they see the current state of the US labor market as either “weak” or “not good”.

Moreover, 60% of the survey’s 1,895 respondents said they disapproved of Biden’s handling of the economy, a six percentage point drop in approval from September.

Many political analysts say the president’s poor poll numbers suggest that Democrats may face a difficult election cycle in 2022. Some have pointed to Republican Glenn Youngkin’s victory over Democrat Terry McAuliffe in Virginia’s state race in November as evidence that the Republican Party may Overturns control of Congress this year.

The GOP victory is noteworthy because Biden won Virginia by 10 percentage points in 2020.

History already points to a difficult year for Biden, as the president’s party typically loses seats in the first half of the state. A weak approval of his handling of the labor market – along with inflation that is at its highest levels in decades – probably won’t help.

The Labor Department’s first look at the US job market for December 2021 showed the national unemployment rate below 4% and 199,000 jobs added last month. While any recent number would have to be taken in the context of economic recovery, when companies are adding jobs more quickly, a look at pre-Covid trends suggests that December was a solid month for jobs.

The average monthly gain of non-farm payrolls in 2017 was 181,000. This number rose to 193 thousand in 2018 and declined to 168 thousand in 2019.

The majority of economists say an unemployment rate of less than 4% is strong evidence that the US labor market is close to full employment.

But economics is not politics. Republicans took advantage of the disparity between numbers More jobs added versus expectations after Friday’s release.

“The latest jobs report wasn’t just a disappointment in December, it was the worst Biden jobs report yet,” Senator Ted Cruz, R-Texas, wrote in a tweet on Twitter Friday.

The House Republicans convention explicitly indicated that news coverage of the report did not live up to Wall Street expectations.

“President Biden just received the worst jobs report of his presidency in December. American workers cannot afford ‘another huge loss’ from this administration,” a post on the House Republican Twitter account read.

Democrats have slim majorities in both houses of Congress. The Senate is split 50-50 between parties, while the Democrats have a narrow advantage of 221-212 in the House.

As Democrats risk losing control of Congress – and their ability to push Biden’s economic agenda – the White House has tried to counter a jittery opinion about the labor market and the economy.

The chair of the Council of Economic Advisers, Cecilia Ross, used to point to larger-than-average fluctuations in job reports. A blog post earlier in January after a disappointing December jobs report confirmed this point.

Ross wrote, “Job numbers are generally reviewed twice before they are considered relatively ‘final’.” As management stresses each month, monthly employment and unemployment numbers can be volatile, and payroll employment estimates can be subject to substantial revision.

CNBC’s Nate Ratner contributed to this report.

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