Visual illusions that play on positive and negative space can be quite engrossing: Our view can shift from seeing a vase to two faces, or from a young lady to old woman. The picture doesn’t change, but our perception does.
Last week’s Bureau of Labor Statistics (BLS) employment report also offered both positive and negative views. Optimists were encouraged by the strong increase in payrolls. But those sensitive to cracks in the labor market noticed a rising unemployment rate and a falling participation rate. These contrasting narratives show us the importance of not relying on a single source for impressions of the labor market.
The divergence in the employment report came from its use of two surveys. The establishment survey of employers showed another month of elevated job creation. However, the unemployment rate relies on a survey of households. This survey showed a decline in self-reported employment, pushing up the unemployment rate.
In past cycles, the household survey has been a leading indicator of a turn in the labor market; when it falls while the establishment survey gains, trouble is brewing. But in this cycle, the divergence has appeared sporadically for two years. Low response rates are adding to variability in the published results, which were already noisy. The household survey calls upon 60,000 households, only half the size of the establishment survey sample—and the scale of the household survey may soon be reduced due to budget constraints.
VIEWED TOGETHER, DIVERSE DATA SOURCES SHOW A LABOR MARKET THAT IS COOLING, NOT CRASHING.
No single survey will be the infallible truth, but review of other statistics improves our confidence that the labor market is simply cooling, not crashing. The BLS’ Job Openings and Labor Turnover Survey (JOLTS) shows steady hiring and few layoffs (though it also suffers from a limited sample and low response). Initial and continuing unemployment insurance claims, reported by state agencies, have held at steady rates that suggest limited layoffs and good success finding work.
In the private sector, payroll processor ADP has published monthly estimates of job gains that align with the BLS estimates, differing only in magnitude of changes each month. Recruiting site Indeed reports that job postings are trending down from their early 2022 peak, but remain above their pre-pandemic level; LinkedIn reports a similar trend in hiring.
We do not mean to suggest the job market is perfect for all workers. Layoffs and turnover are part of the lifecycle, and the shift to a slower steady state can feel disconcerting. But overall, ongoing strength in the labor market is no illusion.
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