Most Americans are so dissatisfied with the economy that they believe the nation is already in recession. Yet the Biden administration often cites robust job growth as proof that the economy is in great shape.
New data from the Federal Reserve Bank of Philadelphia throws cold water on that claim, however. It shows recent job growth has been 80% less than previously estimated.
Each month, the Bureau of Labor Statistics (BLS) produces an estimate for the number of payrolls that businesses added, or subtracted, on net balance. According to those reports, annualized job growth in the last quarter of 2023 was a healthy 1.6%. But that’s likely way off.
The Philadelphia Fed takes this data from BLS and compares it to a much more comprehensive estimate of the labor market each quarter. That allows for better estimates of job growth than can be gleaned from the monthly BLS reports.
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Instead of the 1.6% growth rate previously estimated, the analysis from the Philadelphia Fed showed an anemic 0.3% annualized rate.
That difference of just 1.3 percentage points may not sound like much, but it’s a significant gap. In a country of over 330 million people and over 150 million jobs on businesses’ payrolls, this amounts to over half a million jobs.
In other words, over 500,000 jobs that were supposedly added to the economy in the last quarter of 2023 never even existed. Even more troubling, the previous two quarterly reports from the Philadelphia Fed also pointed to overestimation of payroll growth by the monthly job reports.
This all adds up to a labor market that is less healthy than what is reported in the news headlines.
BIDENOMICS SPIN VS THE GROCERY STORE REALITY
Disturbingly, there are other official economic metrics that also seem to have deviated from reality in the last few years.
In addition to job estimates, the BLS also updates the consumer price index (CPI) each month, a tool used to measure inflation and the cost of living. Some components of the CPI, however, are no longer reflective of the costs faced by the typical American today.
For example, the monthly mortgage payment on a median price home in May was 119.5% higher than it was in January 2021 — more than double in less than three and a half years. But according to the CPI, shelter costs are only up about 22%.
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The official metric is off by roughly a factor of five. The magnitude of this error is illustrated by the fact that a family will pay almost $14,000 more each year, for 30 years, to afford the same house from January 2021, when the Biden administration took the helm of the nation’s economy.
When jobs are being overestimated and the cost of living underestimated, it’s no wonder people have soured on Bidenomics. Anytime the picture being painted by official data is not reflective of widespread perception, then that data deserves extra scrutiny. In this case, the initial economic data being widely reported is clearly misleading.
The massive discrepancies occurring between official data and people’s opinion of the economy are not due to Americans’ having "wrong" feelings about their finances, or a lack of understanding as some pundits keep asserting. Rather, some of the official metrics do not align with reality.
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Although empirical analysis is considered more objective than something so fickle and ethereal as people’s feelings on a topic, that assumes the empirical analysis is underpinned by reliable data. Take away that assumption and hard data loses its advantage when assessing economic conditions.
It’s like gauging the temperature of a room not by observing a faulty thermometer, but by asking the occupants how they feel — and people feel frigid about this economy.
