The US added 589,000 fewer jobs last year than reported. Here’s what it means

[Simone Del Rosario]

The U.S. economy missed expectations for jobs added in January. That said, the unemployment rate did improve to 4%, according to data released Friday.

But this latest look into the labor market is a lot more than month-deep. It includes a downward revision in jobs added to the tune of more than half a million people. And also a major adjustment up in the number of people in the U.S. due to immigration. We’ll break down those numbers in one minute with our guest.

But first, a look at January. The U.S. economy added 143,000 jobs in a month that started with President Joe Biden and ended with President Donald Trump. That number is below the 170,000 jobs expected.

The Bureau of Labor Statistics said the devastating southern California wildfires “had no discernible effect” on the labor market.

And now for those revisions.

I want to bring in Aaron Sojourner, senior researcher at the W E Upjohn Institute for Employment Research.

Aaron, before we get into this month’s numbers, there was a lot being made of what these revisions were going to bring. Now that we have the numbers, we see this revision downward of 589,000 jobs. What’s your takeaway? What does this mean?

[Aaron Sojourner]
The revisions really just reflect the fact that we’ve gotten better information over time than we had right away, and it doesn’t really change the story.job growth is been slower than we thought from the payroll survey, but it’s been stronger than we thought from the household survey. And the weird thing is that they had been diverging from each other over the last year, and so we didn’t know which one was more accurate. And what this revision does is kind of split the difference and say, Well, you know, the payroll number came down, the household number went up, and actually the average was somewhere in the middle, was seems to be about right?

[Simone Del Rosario]
And isn’t it true that this actually isn’t as bad as they thought it was going to be? I mean, preliminary estimates of what this revision was going to be was was a lot worse than what we’re seeing today on paper.

[Aaron Sojourner]
I mean, it’s certainly a lot of jobs. A half million is a lot, but there are over 150 million jobs in the economy. So it’s a very small share that we’re talking about. It’s a rounding error on some level. And you know, the economy is an enormous, complex, fast moving thing, and the Bureau of Labor Statistics does amazing work to measure it in real time. You know, just weeks after they measure it, they’re telling us about it, and there’s always noise in that process. And the great thing that they do is they they tell us their best estimate right away, and then they get better data over time from administrative sources, and they go back and they say, we’re going to, we’re going to update our estimates based on this slow but more accurate information, and that’s what the revisions are about. And so, you know, I think it’s more important to pay attention to the trends and how the trends are changing than the levels. So, yeah, I mean, job growth did look particularly fast over recent years and you know, but we still added 2 million jobs over the last year, even by these more accurate revised numbers, which is still quite a fast pace of growth given the high employment rates that we have right now.

[Simone Del Rosario]
One of the things that stuck out with me with this latest report is the revisions to November and December. In particular, we’re looking at more than 100,000 jobs revised up for those two months, which was just showing a much stronger labor market than we previously thought. Yeah,

[Aaron Sojourner]
those were already the estimates we already had. Were very strong growth, and they revised them up, as you said, by 100,000 which, yeah, even puts a more of an exclamation point on it, that the job market is still very is very strong. And, you know, maybe it’s not quite super strong as we thought, but, like, it’s actually very strong. Employment rates are quite high. We have a lot of people who are older now, like the baby boomers are retiring, and employment rates. The fall as people enter those ages. We have a lot of people entering those ages. So you know that’s downward pressure on labor supply. But you know things are things are happening, and people are finding jobs, and wages are rising faster than prices. So yeah,

[Simone Del Rosario]
are you surprised by the wage numbers that we got for this latest payroll data? Average hourly earnings increasing 4.1% on the year. That’s a pretty hot clip. What does that do for what the Federal Reserve is looking at doing later. I mean, what is this telling us about, about the labor market?

[Aaron Sojourner]
Yeah, wages are growing faster than prices, but we are seeing some price inflation. the strength in the labor market makes it less likely that the Fed will cut rates and provide more acceleration to the to the economy, we see consumer prices starting to creep up again, some price inflation coming back. And that’s, I think, a very worried, worrisome sign for the Fed. So you know, wage growth alone is no problem.

[Simone Del Rosario]
Let’s talk about the other major revelation that happened in this report, which is, we knew this was coming. They were going to be revising the population numbers. And if I can pull up my notes here, we can see that the adjustment in the US population, for civilian, non institutional population, age 16 and over, that’s how they word it, is up by 2.9 million. When we look at the adjustment for the civilian labor force, it’s up 2.1 million. How do those population provisions adjustments, how do they impact the labor picture? And are we surprised that the unemployment rate is ticking down?

[Aaron Sojourner]
You know, we have had a surge in population in recent years, a lot of immigration, and so this is like bringing that into the estimates in a substantial way. But again, it doesn’t really change our view of the economy. We’ve we knew that this was coming. The census had previewed the top line results. And the main thing is that what we should pay attention to is the things like you said, the unemployment rate, the labor force participation rate, the employment rate, not the levels so much, because the levels get shifted all at once this month, even though it’s really reflecting a long term process that we were missing in the past.I wouldn’t get too excited about the fall in unemployment rate. It was pretty close to a rounding threshold. It just kind of edged down a little bit across the threshold. But the unemployment rate is quite low, and that’s really great news for American workers. You know, it is hard to find a job. If you’re you’re looking hiring rates are low, and long term unemployment is, you know, substantial if, but it’s a small share of people who are unfortunately find themselves in that situation. You know, most people who want jobs have them and are have a lot of job security. Actually, it’s a strange labor market right now because we’ve had four years of incredibly secure jobs for people who have them, the layoff rates have been at record lows for years now. Yeah, but now it’s also harder for people to find a job if they need it. So it’s kind of like people are frozen in place. If you have a job, you can keep it. If you don’t have a job, it’s hard to get one,

[Simone Del Rosario]
And what you just said confirms a LinkedIn survey that just came out showing that the majority of folks actively looking for a job are in the job market looking for at least six months. 22% so more than one in five are stuck looking for that job for more than a year. So just echoing the point that you just made about how difficult it is if you aren’t actively employed right now to find that job.

[Aaron Sojourner]
I think a lot of employers are facing a lot of uncertainty right now and reluctant to make big moves. With the policy environment changing so much and so much uncertainty on the economic policy front, it’s got things a little bit frozen in place, and that’s like, the most troubling fact right now about the labor market is the fact that there’s, there are these people who’ve been stuck and struggling to find a job, and that that is really hard to be in that situation. It’s very demoralizing. Yeah.

[Simone Del Rosario]
Aaron Sojourner, senior researcher at the W E Upjohn Institute for Employment Research. Thank you so much for breaking this down For us today. We appreciate it.

[Aaron Sojourner]
Thanks Simone.