Mainstream media outlets report this headline employment data to be evidence of very strong job growth and economic success. But for Ryan McKen of the economics and libertarian nonprofit think tank Mises Institute, the released information is questionable, just like last year. (Related: Top economist warns the next recession will be as if "the whole country takes a pay cut.")
BLS data for May shows that all economic leading indicators point to an economic slowdown except the payroll jobs data. Both the Philadelphia Federal Reserve's manufacturing index and the Empire State Manufacturing Survey are in recession territory, McKen wrote, adding that even the yield curve is on its way there too. Federal Reserve staffers, who almost always take an optimistic view of the economy, now predict a recession in 2023.
Moreover, individual bankruptcy filings were up 23 percent in May. Temporary jobs were down, year-over-year, which often indicates a looming economic catastrophe.
"A lot of the jobs data isn't actually very good," McKen explained. "The headlines have focused on the so-called establishment survey which is a survey of employers and shows only the number of positions, not the number of employed persons. The Household survey, on the other hand, surveys people."
As per the household survey over the past two years, job growth is not as high as what the establishment survey gathered. Since 2022, the surveys have ceased to follow a similar trend, with a sizable gap forming between the two polls. In fact, over the past two years, the two surveys show a gap of 2.2 million.
"Moreover, in May, while the establishment survey showed a gain of 339,000 jobs month-over-month, the household survey showed a loss of 310,000 employed persons," added McKen. "That's a gap of more than 600,000. Looking at month-to-month changes, we can also see how the two surveys have diverged since April 2022."
The gap, according to him, may be due to the drop in responses in recent years which means that the survey for the enterprises is losing its reliability as an indicator of the overall economy. Meanwhile, the poll for households has not seen as large a drop off in responses.
Also, the business poll does not track self-employed workers, who have been a significant factor in employment trends over the past three years. According to reports, self-employment collapsed in April 2020 but surged again by April 2021. But by 2023, self-employment had collapsed again and year-over-year self-employment growth dropped by 6.5 percent in May.
Other economic analysts are pointing to the number of Americans filing new claims for unemployment benefits, which surged to a 1.5-year high last week, as another indicator of a looming economic catastrophe.
According to Conrad DeQuadros, senior economic advisor at Brean Capital in New York, the jump in claims could be a sign of a pickup in layoffs.
Initial claims for state unemployment benefits jumped 28,000 to a seasonally adjusted 261,000 for the week that ended on June 3, the highest level since October 2021. Economists polled by Reuters had forecast 235,000 claims for the latest week.
The news outlet also stated that unadjusted claims increased only 10,535 to 219,391 last week, with applications in Ohio surging to 6,345 and filings in California shooting up 5,173. Claims increased by 2,746 in Minnesota. Applications in Ohio have risen in recent weeks, attributed by the state to layoffs in the manufacturing, automobile and transportation and warehousing industries. Auto manufacturers usually close plants in summer for retooling.
"This implies that there might be some additional volatility in initial claims over the coming months," said Gisela Hoxha, an economist at NY Citigroup.
Check out EconomicRiot.com to read more about economic indicators pointing to the impending economic catastrophe.
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