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Does The 90% Crash In US Jobs Growth Guarantee A Recession?
It's a good thing payrolls are (allegedly, purportedly, suddenly) growing again in America, because
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BLS needs to rethink the jobs report. The revisions are too large for the data to be credible.
It seems the error sources include:
– Declining response rates. More accurately, responses are slower so the response rate at the first preliminary report is low.
– Undocumented workers. BLS surveys do not exclude undocumented workers but the QCEW data used for benchmarking does, and BLS’ corrective methodology assumes steady immigration patterns.
– Gig workers. Neither BLS nor QCEW data capture gig work, which has grown a lot.
– Birth-death model. I’ve read this tends to be most inaccurate at economic turning points.
– Annual benchmarking. Quarterly benchmarking could help reduce sample error stacking and the birth-death model error.
I would think that with access to all state and federal agency data, and a sufficient budget and essential status, the jobs report data could and should be better.
Hopefully this doesn’t get fixed until after 2028, because everything Trump touches becomes a mess or worse.
On the article topic, I still think that the economy excluding AI investment is already tipping into recession. In a bifur-K-ated economy, recessions might develop more slowly and be harder to define and call. “Slowly, then quickly”.
The apparently likely effects, of AI on (human) employment would seem only to be in the early stages – so hard to see anything but further declines on the horizon. At least the Fed shouldn’t have to be exhorted, manipulated and threatened to ease…
Plot real GDP growth and payroll growth. Pretty clear relationship.
https://fred.stlouisfed.org/graph/fredgraph.png?g=1RX29&height=490
Some argue AI is driving productivity higher, so those curves will decouple – in a secular, sustained way, not the cyclical pattern and short blips we’ve always had, that are apparent in the chart.
https://www.ft.com/content/4b51d0b4-bbfe-4f05-b50a-1d485d419dc5?
I am doubtful we’ll see that decoupling in the near term. Among other reasons, if AI did displace that much labor that quickly, consumer sentiment and demand would be hit and with it GDP.
Oh don’t be such a worry wort. Those right-sized employees will simply pivot into well-paying careers as nurses/PAs and working in construction jobs building datacenters and prisons. Didn’t Elon and Jensen recently say something to that effect?