1.1M Reasons Why Fed’s Revised Jobs Report Demands Healthy Data Skepticism

Revised jobs report data shows the difficulties of planning for the future based on government numbers.

Government data is critical in helping companies and individuals make decisions about where we are, where we’re headed, and whether the future looks bright or cloudy.

Data is fallible, of course, but when revisions — especially to sales or employment figures — tell two different tales, it becomes harder to navigate already stormy macro seas.

The Federal Reserve Bank of Philadelphia said this week that only 10,500 net new jobs were added during the second quarter “rather than the 1,121,500 jobs estimated” in previous employment reports.

Those are the headline numbers, and there are several moving parts to the story. As Bloomberg reported, the Fed report represents an “early benchmarking” that in turn can see significant revisions over time. And early next year, the Bureau of Labor Statistics (BLS) will publish its own “annual revision” to U.S. payroll data.

The discrepancy of more than 1 million jobs far outstrips the usual roughly 150,000 revision, and one quarter’s revision does not a whole year make. We’ll know more in February 2023 when the BLS info comes through.

But there’s an old saying in investing that rings true here: It’s better to be generally right than precisely wrong. The Fed data hints that Main Street businesses, especially, have not added jobs at the rate that anyone thought.

A Different Read Across

The read across here is that caution abounds. Companies do not add jobs unless they see growth on the horizon — enough growth so that revenues and demand for their goods and services translate into a need to bulk up staff. Inflation may be making it prohibitively expensive to manage expansion too.

And if that’s the case, then it’s also a negative read across for the paycheck-to-paycheck economy, which would depend on job growth and wage growth to help overcome day-to-day financial challenges.

The revised data also might throw some cold water on the optimism evident in the latest consumer confidence data, which, per The Conference Board, now stands at the highest level since April of his year. The December reading stood at 108.3, as consumers were positive about business conditions and income.

But in the meantime, Labor Department data released Thursday (Dec. 22) showed that there were 216,000 jobless claims in the week ending Saturday (Dec. 17).

No one’s out of the woods yet, then — not by a long stretch.

The Fed’s significant revisions also spotlight the hazards of relying solely on numbers to get a sense of what’s going on in the economy at large because numbers get revised, and all of a sudden, what we thought was happening wasn’t the case at all.

We’ve been here before, and fairly recently. As spotlighted by Karen Webster, census data about the great digital shift to online commerce suggested that the momentum was peaking, even petering out. And then came revisions that showed that online sales were indeed strong, better than originally suspected, and pretty much here to stay.

Two major glaring errors — one spotlighted by the Fed (on jobs) and by PYMNTS (on retail) — show just how tough it can be to gauge the true state of things by relying on numbers without a healthy dose of skepticism.