July’s job report showed a continued increase in the number of jobs, but according to a new poll from The Economist and leading online pollster YouGov, many Americans don’t agree with the narrative of an improving employment picture.
Six in 10 regard unemployment as a very or somewhat serious national problem.
Just 24% say that the jobless rate dropped last month.
Only 34% say the number of jobs is increasing, though that has been the case in official government numbers every month since the economy began recovering from the COVID-19 pandemic.
Americans are nearly twice as likely to say the economy is shrinking rather than growing (38% vs. 21%), 44% say it is currently in recession, and another 22% believe a recession is somewhat or very likely in the next year.
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Maybe the reason people feel that way is because they’re right…? Over the last year, the Department of Labor (DOL) has consistently reported stuff higher before revising it lower, and in the last month alone the government has revised the following data sharply lower:
Jobs
Job Openings and Labor Turnover Survey (JOLTS)
New Home sales
Housing Starts and Permits
Industrial Production
Personal consumption expenditures (PCE) and core PCE (which excludes food and energy)
It’s difficult to discern whether DOL has really been that inept or whether they’re just plain lying. According to UBS, it’s underfunding of statistical agencies that has contributed to a decline in US data quality, and JP Morgan has cited the Bureau of Labor Statistics’ broadly declining response rates to its surveys over the last decade, now at only 45% for the current employment survey (CES) and just 31% for the JOLTS.
Another issue cited by JP Morgan is the widening difference in responses between the preliminary and final releases, which, as we have seen, can lead to large backward revisions. In the establishment survey, response rates for the preliminary release have definitely been declining, but by the time the BLS releases its final estimates, the rate among the active sample does improve to an annual average of 94%. On the other hand, the JOLTS survey response rate for the active sample only improves to 64% from 58% between releases, and both rates have been trending downwards for years. This lower rate increases the risk of bias in the JOLTS survey. (Data provided by the Bureau of Labor Statistics’ Office of Survey Methods Research.)
It just so happens that the numbers have consistently fit the White House’s narrative of an improving economy, so while there may be problems with the funding and overall competence at DOL, the worker bees at BLS may also just be using the goal seek function in their Excel spreadsheets, working backward from the result they were told to report.
Last week, the bees finally got the memo. With the consensus estimate calling for only a modest drop in the July job openings from 9.582 million to 9.5 million, the BLS rolled a grenade down the hallway on Wednesday and reported that there were only 8.827 million job openings in July, the first sub-9 million print since March, 2021.
It was the 3rd biggest miss on record.
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Consumers’ excess savings are running out, they’ve maxed out their credit cards and they’re having trouble making their payments. 40 million people with student loans totaling $1.57 trillion will have to resume payments in December after enjoying a three-year break. 401k hardship loans have spiked 46% this year. Banks are tightening lending standards while the cost of housing continues to soar. Unfortunately, we are paying the price of previously reckless monetary policy actions and now have many reasons to doubt the soft-landing narrative.
From a wealth management perspective, it doesn’t mean that there won’t be any money to make in equities if and when the economy slows, and, in fact, we expect that there still will be. Most investors would be wise to dollar cost average into stock market declines anyway.
But if you’re getting close to retirement, these are matters to consider; it’s probably a good time to make sure your retirement plan has been adequately stress-tested. Moreover, if you’re planning to work for a while longer, it’s more important than ever to maintain your network and to proactively hunt for new opportunities.
Government reports are a lagging indicator, and for us, the news of the week is that they’re also garbage due to underfunding, lack of response data and, probably, political bias-- in our view, seven downward revisions in a row is not random. We submit that there’s a need to plan accordingly for that, both in terms of your portfolio management and your career.
When it comes to fortifying your portfolio or to locking down your retirement and estate plans, we are here to help you, so let us know if we may be of assistance.
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