This week was full of employment data that painted a very mixed picture. ADP showed a very weak job number, but the Bureau of Labor Statistics (BLS) showed a surprisingly strong report.  This caused significant swings in interest rate markets. Upon closer examination of the BLS report, several questions arise regarding inconsistencies with prior results.  

JOLTS Shows Job Openings Rise, But Quality in Question

The Job Openings and Labor Turnover (JOLTS) report for April came in stronger than estimated, with an increase in job openings of 191,000 to 7.391 million. 

• These job openings were primarily in Professional and Business services, showing 171,000 openings. Many of these jobs are likely remote positions and could be posted in several market areas for the same role, potentially skewing job opening numbers upward. 
• Healthcare and Social Assistance added 102,000 openings.
• Notably, Leisure and Hospitality declined for the third straight month, reducing 92,000 job openings in April. 

This last point is an important metric to consider because the May BLS Jobs report shows an increase of 48,000 new jobs, a figure that appears inconsistent with fewer job postings in the prior month.  

ADP Private Sector Hiring Weakest Since 2023

On Wednesday,  the ADP Employment Report for May was released. ADP is one of the largest payroll operators in the country and has a unique position to track job creations and losses in the private sector. While it does not track government jobs, private-sector employment trends offer valuable insights into overall economic health. ADP reported that only 37,000 jobs were created in May, much weaker than the 115,000 expected and the lowest figure since March 2023. April’s number was also revised lower, further weakening the report. Small businesses (1-49 employees) lost 13,000 jobs; large businesses (500+ employees) lost 3,000 jobs; and medium-sized business (50-499 employees) added 49,000 jobs. 

This is very important because the BLS Jobs report uses modeling to determine the small business job growth, as opposed to using real-time data like ADP.  The BLS reported that small businesses added 199,000 jobs in May, which is a notable discrepancy compared to ADP’s 13,000 reported job losses.  

May BLS Report Beats Expectations, Revisions Persist

When examining the May BLS Jobs report, we need to remember that it is actually two (2) different reports combined: 

1. The Business Survey, which gives us the headline job creation number, and 

2. The Household Survey, which provides the unemployment rate.  

The Business Survey saw a whopping 139,000 jobs created, topping estimates of 125,000.  However, the BLS has frequently revised prior months’ headline numbers significantly downward, which is a trend that continued in the May update. In this report, the previous two months were revised lower by a combined 95,000 jobs. That almost negates the job growth shown in this report.   

WSJ Flags BLS Data Accuracy Concerns

The Wall Street Journal published a very interesting article on Wednesday that described a weakening in the data integrity from the BLS. The article mostly addressed problems with the BLS Consumer Price Index report, but many of the issues also can apply to other BLS reports, like the Jobs report. The article discusses how not being able to hire enough workers has caused them to rely on more imputed (estimated) data. The BLS was created in 1884 and holds an important place as the independent provider of economic data that is relied upon by not only our government but by governments around the world to predict economic conditions and to make decisions. Reliability in this data is essential to the US maintaining its status in the world economy.  

QCEW Shows Job Growth Overstated by 500K

Additionally, the BLS released its Quarter Census data for Employment and Wage (QCEW) for Q4 2024. This is actual, non-modeled data that showed job growth was overstated by approximately 500,000 jobs. This highlights the need to closely monitor differences between modeled estimates and verified data, even within the BLS’s own reporting structure. 

Household Survey: 696K Jobs Lost, Unemployment Ticks Up

In the May Household Survey, the BLS reported a loss of 696,000 jobs, a stark contrast to the Business Survey’s gains. Why didn’t the unemployment rate rise more significantly? Roughly 625,000 people left the workforce and were no longer counted. The unemployment rate calculation includes only those who are “actively looking” for employment in the previous four (4) weeks or able to take a job (possibly for health reasons). Even if they want a job, if they didn’t meet these criteria, they aren’t included.  If the 625,000 people were added back, the unemployment rate would be closer to 4.6%.  Even with the 625,000 removed, the unemployment rate ticked up from 4.19% to 4.24%, almost to 4.3% on a rounded basis.

Looking Ahead

Next week is an inflation-heavy week:

Tuesday, June 10: 

• NFIB Small Business Optimism Index

Wednesday, June 11: 

• Consumer Price Index (CPI)
• 10-Year Treasury Auction

Thursday, June 12: 

• Producer Price Index (PPI)
• Initial and Continuing Jobless Claims
• 30-Year Auction

Friday, June 13: 

• University of Michigan Consumer Sentiment