Why the U.S. Jobs Data May Be Misleading

Danielle DiMartino Booth, CEO and chief strategist at QI Research, come on over this way.

Nice to see you.

Same here.

Good to see you again.

Really grateful for your time to join us here on taking stocks.

So you sent along really interesting notes about labor force.

Let me ask your take on participation rate, a multi-decade low.

What do you see the numbers?

I mean, boy, did we ring in the 250th anniversary of the nation with the lowest labor force participation rate.

Since 1976 when we had the bicentennial, so we're, we're not seeing a lot of dynamism in the workforce.

In fact, this morning's ADP weekly data came out at about 21,000.

That's an 84,000 monthly run rate, which is about half of what it was just a few weeks ago.

So we're back to where we were in March in terms of how quickly we're coming off kind of the high of the let's panic buy in front of oil prices going up.

Let's hurry up and.

Hire people for the World Cup.

By the way, great job, Argentina.

Um, great, great game, um, but it's, you know, we're seeing, and I think that's one of the reasons you're seeing the markets whipsaw.

I mean, you're seeing almost daily violent rotations right now.

You're seeing consolidation, but you're seeing things that you would have normally seen in a month's time or in several months' time in a matter, in a matter of the days.

I mean this volatility is insane.

So what does all this tell you about the underlying health of the US labor market, and I wonder, Danielle, from your years of expertise, are you looking at things and seeing things in the data you think the rest of us would benefit from paying a little bit more attention to?

So I think we need to pay attention to which jobs are being created, which jobs are being destroyed.

We're down more than a million full-time jobs, so we're creating a lot of gig workers, a lot of Uber drivers, a lot of DoorDash drivers, but that's not what you want to see for sustainable wage inflation.

In fact, we've, if you look at the Atlanta Fed, we've retraced wage gains all the way back to 2019 before the pandemic.

You mentioned the World Cup earlier.

I think there had been many expectations for the hospitality sector in particular, the narrative being, hey, we get this big bump.

So far have things played out according to those all of that and then some give it back in June.

So we saw a multiple stigma event in terms of job losses in that sector in June.

So you're seeing how short-lived that burst is.

We also had tax refund season come and go.

So right now the US economy is going to have to stand on its own two legs and let's see how the second half of the year plays out with that in mind.

How about your take on the difference between what we're seeing.

Between payrolls and the household survey, are they telling us two different pictures?

And is there one that's a bit more maybe believable from your perspective?

Well, I mean, you have to bear in mind what we started talking about the labor force participation rate.

When that declines quickly, you're going to see the unemployment rate decline.

That's just numerator denominator.

So in this case it was not a good thing that we saw the unemployment rate decline to 4.2% because that was a reflection of people giving up on finding work.

So right now the household survey is giving us a much better picture of reality compared to non-farm payrolls, and in fact, the new Fed chair Kevin Warshch said, you know, talk to me on the 3rd revision for payrolls.

Other than that they're irrelevant, and he's talking about 18 months after they're reported.

This is one of the most interesting tidbits that's easy to take away.

Last 40 months of payrolls, 30 of them.

Have been revised downward.

Wow.

Downward revisions, downward revisions, 30 of them.

At some point you're like, OK, there's something wrong with the model, but that's why Worshch is rightly not trusting the data, and I hope that he comes in and looks for alternative data.

That's the way he's promising to do it.

That's right.

He is talking about a lot of big changes to.

Task forces task force for that and we get Fed minutes tomorrow from his first meeting in May.

So we'll have to see how investors digest.

I bet they might be quieter than we're expecting.

Danielle DiMartino Booth, CEO and chief strategist at QI Research.

It's been some time since I've seen you.

Really grateful for you joined the show today.

Thanks a lot, of course, to have you.