- In 2021, the Labor Department’s preliminary monthly jobs report and Wall Street projections have been less reliable than usual. And President Biden has paid the political price.
- The average monthly revision in the Labor Department’s jobs report has topped 100,000 in 2021, the highest level ever.
- According to preliminary reports from the Labor Department, the US economy added 4.9 million jobs in the first 10 months of 2021. After the revision, this number increased to 6 million.
- The noisy figures mean the White House faced harsh headlines on days when the jobs report was released for “missed expectations.” This cycle appears to have helped voters handle Biden’s economy.
To say that the Labor Department’s regular jobs report is important would have to do with what many people think of the monthly economic holiday.
That data, which includes the official measure of national unemployment and monthly job creation, not only shapes economic forecasts. It also serves as a powerful political barometer, a quick report card on the success or failure of the US President’s economic plan. This could affect consumer attitudes in the short term and could impact voters every two years.
The notion that the government provides accurate numbers entails monthly updates.
Now the COVID-19 pandemic has made the job of the Bureau of Labor Statistics harder, and its initial monthly reports are far less accurate. And President Joe Biden, who will mark a year in office on January 20, has paid a political price as his party tries to take control of Congress in November’s midterm elections.
During 2020 and 2021, Labor Department surveyors have found it difficult to calculate job creation. Biden and most Americans have seen early figures that often assume true job growth.
The average monthly revision in the Labor Department’s jobs report for 2021 is well above 100,000 so far. This figure may change, as the government has not published the final update for the November and December revisions.
If this figure holds up, it would mark the most extreme omission in non-farm payroll estimates in at least 40 years, even when adjusted for US labor force growth, a CNBC analysis of BLS data found.
Over time the impact of those amendments appears to be even deeper.
If the economy added jobs for the first time reported between January and October, the US would have added 4.9 million jobs in the first 10 months of 2021. After the revision, however, data shows the US actually added 6 million jobs in those months.
CNBC excluded November and December from calculations because the BLS has not published its final revisions for those months. The Labor Department initially estimated employment gains of 249,000 and 199,000, respectively, for those months. This would put the total by 2021 above 6.4 million jobs.
The amendments have become even more apparent in the specific months of 2021.
When the Labor Department first reported employment data for January 2021, it put month-on-month net job creation at just 49,000. Following the amendments, the government said January's profit came in at 233,000 jobs, more than quadruple the original reading.
The same thing happened the next month. The Bureau of Labor Statistics previously 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 reading the initial jobs report saw a figure of 157,000 jobs, well below the final total.
People often mistakenly believe that initial data is "wrong" because the government later revises it, Tyler Downing, a senior economist at the Department of Labor's current employment statistics, said in an email.
"No, based on what the sample told us, we got it right," he wrote. "In each publication, estimates are accurate based on the sample obtained and the calculation of seasonal adjustment factors."
Downing said 2021 saw one of the lowest data collection rates for the BLS for its first initial release, or report released on the first Friday of every month. It is not clear if the economic recovery from the pandemic this year has made data collection more difficult.
The Labor Department reported a smaller pool of data than normal in its 2021 jobs report, meaning the first estimate lacked general accuracy. The annual average collection rate for the total number of businesses sampled came in at 69.8%. The last time it was so low was 2008.
By the third and final release, the current Department of Employment Statistics collection rate is typically above 90%.
"The collection rate for the first preliminary estimates has increased from an average of 65.0 percent in 2003 to 73.5 percent in 2020," Downing wrote. "However, there will always be gaps with some businesses, as they don't have their payrolls fully processed."
If Wall Street had not paid so much attention to economists' forecasts before the jobs report, the short report and subsequent revisions would not have been as problematic in Washington. Focusing on whether the report lives up to expectations could have implications for Biden and his party in this year's election.
Dozens of news media outlets, including CNBC, cite surveys of economists in stories published before the Labor Department's official release. Doing so helps journalists set readers' expectations for job growth and gives them an idea of what Wall Street expects as many traders buy and sell based on their outlook for the broader US economy. sell.
But the pandemic has also weakened the models economists use to predict payroll growth. Government and private sector economists have adjusted the number of jobs based on the season for years.
At the best of times, forecasters have a hard time predicting human behavior. But adding an epidemic to the mix has led to improvements in the most modest of human behavior, from travel and indoor dining patterns to adherence to public health advice. Wall Street's economics models – like those in the Department of Labor – have become less accurate as a result.
Earlier last year, economists surveyed by Dow Jones said they expected the US economy to add 50,000 jobs in January 2021. After the revision, the actual number came to 233,000.
Before the February report, the same economists had forecast a gain of 210,000 jobs. His estimate dropped to 326,000 from the final print of 536,000.
According to an analysis of data by CNBC, the Dow Jones group of economists' average monthly projection showed a reduction of 254,000 jobs per month in 2021 compared to the last revised figures.
The gap between estimates and final numbers has narrowed in recent years. For example, in 2017, the average gap between economists' expectations for monthly job growth and the last revised figure was just 30,000 jobs, about 1/9th of the previous year.
Seven of the 12 initial Labor Department jobs reports in 2021 resulted in reductions, or "misses," the Dow Jones expected.
The combination of nosier initial government data and less accurate estimates from economists has contributed to a tougher reality for the Biden administration.
The White House has faced harsh headlines on days when monthly jobs reports surfaced for "missed expectations". Voters then don't reward Biden for the major amendments that come weeks later.
According to a CNBC/Change Research poll published earlier this month, some 58% of voters say they disagree with how Biden is handling the US job market. This is worse than their views on the job market as a whole: 52% of those surveyed said they view the current state of the US job market as "bad" or "not so good."
Sixty percent of the survey's 1,895 respondents said they disapprove of Biden's handling of the economy, a six percent drop in approval since September.
Many political analysts say the president's flagging polling numbers suggest Democrats could face a tough election cycle in 2022. Some have pointed to Republican Glenn Youngkin's victory over Democrat Terry McAuliffe in Virginia's November gubernatorial race as evidence that the GOP can take control of Congress this year.
The GOP victory is notable as Biden won Virginia by 10 percentage points in 2020.
History already suggests a difficult year for Biden, as the president's party typically loses seats in the first midterm following his victory. Their poor acceptance of handling the job market, along with inflation running at its highest level in decades, probably won't help.
The Labor Department's first look at the US jobs market for December 2021 saw the national unemployment rate below 4% and 199,000 jobs were added last month. While any recent numbers need to be taken in the context of an economic recovery when companies add jobs more quickly, a look at pre-Covid trends shows that December was a strong month for jobs.
The average monthly non-farm payroll benefit in 2017 was 181,000. This number increased to 193,000 in 2018 and to 168,000 in 2019.
Most economists say an unemployment rate of less than 4% is strong evidence that the US labor market is approaching full employment.
But economics is not politics. Republicans captured the disparity between the numbers Expectations versus number of jobs after Friday's release.
"The latest jobs report was not only a December disappointment, it was Biden's worst jobs report ever," R-Texas Sen. Ted Cruz wrote in a Twitter post on Friday.
The House Republican convention explicitly referenced news coverage about the report falling short of Wall Street's expectations.
A post from the House Republican Twitter account read, "President Biden had the worst jobs report of his presidency in December. American workers can't afford 'another big lapse' from this administration."
Democrats have a small majority in both houses of Congress. The Senate is split 50-50 between the parties. Democrats hold a narrow 221-212 advantage in the House.
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 soured opinion on the job market and economy.
Economic Advisory Council President Cecilia Rouse has made a habit of pointing out above-average volatility in jobs reports. She published a blog post in early January, following a heavy December jobs report, that underscored the point.
"The number of jobs is typically revised twice before they are considered relatively 'final,'" Rouse wrote. "As the administration emphasizes each month, monthly employment and unemployment figures may be volatile, and payroll employment estimates may be subject to substantial revision."
, CNBC's Nate Ratner