The Shockingly Large Downward Revision of Jobs May Be an Exaggeration Thanks to the Migrant Surge
The U.S. labor market may not be quite as soft as the very large downward revision to payroll figures from the Labor Department this week suggests.
On Wednesday, the Bureau of Labor Statistics said that the monthly jobs reports overstated job growth by around 818,000 in the 12 months that ended in March. This was toward the high end of estimates of economists and the largest revision since 2009, when the economy was reeling from the financial crisis.
Taken at face value, the revision suggests that employers added 174,000 jobs per month during the relevant 12 month period, down from the 242,000 suggested in earlier estimates.
While the size of the revision was in line with what Wall Street expected, making it a non-event for financial markets, it caught the political world and many regular Americans by surprise. Gina Raimondo, who happens to be the Secretary of Commerce, initially dismissed the revision as misinformation from Donald Trump, displaying a jaw-dropping ignorance given how widely publicized the revision was ahead of time and after its release.
Many Republicans wondered aloud if the revision was proof of a conspiracy to cook the books in the monthly jobs report. That’s understandable. The size of the revision seems implausible. Could an error of that size in something as important as the employment reports be an innocent error? In some ways, it would be more reassuring if the numbers were cooked rather than just inaccurate. Corruption at that scale takes competence while blameless inaccuracy raises questions about whether government statistics can be trusted at all.
The best evidence against the conspiracy view of the revision is that the new figures, which are still preliminary, were put out by the very same outfit—the Bureau of Labor Statistics—that publishes the monthly estimates. It would be a very strange and clumsy conspiracy that cooked the books for a year and a half but finally released the real numbers in the middle of the Democrats’ national convention.
The timing of the revision is so bad for the Democrats that you can almost understand Secretary Raimondo’s suspicion that it must be GOP misinformation. The report suggests that the labor market’s weakness is more severe and began much earlier than previously thought. As we pointed out in Breitbart Business Digest, the revision not only erased all the gains in manufacturing, it shows that we lost manufacturing jobs during the period in which the Biden-Harris administration has been touting a manufacturing boom.
Large Numbers of Illegal Alien Job Holders Explain Part of the Revision
What’s more, it is likely that the revision overstated the weakness of the jobs market. The data on which the revision was made is largely derived from the Quarterly Census of Employment and Wages (QCEW), which is based on state unemployment insurance records. Typically, this is more accurate than the business survey data that goes into the monthly reports. But it has a weakness: it largely excludes unauthorized immigrants who are not eligible to collect jobless benefits.
Historically, this has not mattered very much. The benchmark revisions based on the QCEW of the past also overlooked illegal aliens; but because their numbers did not fluctuate all that much, they didn’t influence the jobs figures. The surge in illegal border crossings, and the release of millions of migrants into the U.S. by the Biden administration, however, has led to a large inflow of unauthorized workers. Employers likely are not paying unemployment insurance for many of these workers, especially if they are being paid “under the table,” as the saying goes.
What this means is that many of the jobs that seem to have been illusory are likely very real. They’re just not held by people authorized to work in the United States. They’re likely held by illegal immigrants. Economists at Goldman Sachs who have analyzed the issue estimate that the revision could have erroneously erased 400,000 to 600,000 workers from the payroll numbers.
Jim Bianco, of Bianco Research, agrees.
I'm going to push back on the repost below ...
— Jim Bianco (@biancoresearch) August 21, 2024
The assumption is that a downward revision in jobs means fewer jobs were created. But now, it might mean firing a "W2 employee" for an "under the table" employee. So, the job still exists; it is just held by someone "off the books."… https://t.co/JM5MCdlWRL
If you look at which part of the economy the biggest downward revisions hit, this supports the idea. Hospitality and leisure, a major source of employment for unauthorized immigrant workers, saw 150,000 jobs erased. Retail trade job growth was diminished by 129,000. Manufacturing job growth shrank by 115,000. The Goldman analysts point out that this is “not inconsistent” with the idea that the size of the revision was exaggerated by the exclusion of illegal immigrants.
Goldman estimates that the true downward revision should be around half of the number released Wednesday, between 300,000 and 400,000.
Obviously, this is not something Kamala Harris or Gina Raimondo are likely to be eager to point out. “No! The jobs market is much stronger than it looks—as long as you count all those illegal aliens we let in,” is probably not going to win many votes in the American heartland.
Republicans, however, might want to take notice. It is evidence that the Biden-Harris economy’s job record is not benefiting Americans as much as it appeared to be because a huge number of the jobs are going to illegal border crossing migrants.
