A No Good, Very Bad, Horrible Jobs Report
If you squint at the latest jobs report, you might find something to cheer about. But if you look at it with clear eyes, what you really see is an economy downshifting and bracing for impact.
The Bureau of Labor Statistics told us Friday that employers added 142,000 jobs in August—hardly anything to write home about and well short of expectations for the second month in a row. Add to that the revisions to June and July, which collectively erased 86,000 jobs from the books, and the three-month average is now a tepid 116,000. That’s a far cry from the 202,000 monthly average we saw last year.
If we narrow that down to the private sector, employment grew by 73,900 in August, falling short of the consensus forecast of 136,000. What’s more, the prior month’s private sector figure was revised down from a lukewarm 97,000 to a chilly 74,000. The three-month average is now just 96,000. This suggests that businesses are not expanding payrolls, indicating a weakening demand for labor.
Go a step further and subtract the so-called government-adjacent sector of health care and social assistance, and private payroll growth drops to just 73,900. After revisions, the July figure was just 15,200, bordering on contraction territory, and the June figure was 28,3000. That brings the three-month average down to just 39,100, one of the weakest three-month periods outside of outright recessions and employment contractions recorded in data going back to 1990.
So, where’s the good news? August was not as weak as July or June, so the deterioration of the labor market may not be getting worse. Then again, given the history of large downside revisions, it’s very likely that the reported numbers for August are too high and will be revised down. So, perhaps things are getting worse and we just do not know it yet.
The unemployment rate fell from 4.3 percent to 4.2 percent. But that decline is less a sign of strength and more of a rounding error and a statistical quirk. The rise to 4.34 percent was largely due to temporary layoffs, which cleared up by August. And the actual move was from 4.25 percent—which was rounded up to 4.3 percent—to 4.23 percent—which was rounded down to 4.2 percent. So, all we really got was a two-tenths of a percentage point improvement that looks larger due to rounding.
The household survey, from which the unemployment rate is derived, showed slightly higher employment growth in August, with the number of employed people rising by 168,000. The discrepancy between the establishment survey and the household survey that got a lot of attention earlier this year after several reports showed far less employment growth in the household survey than the establishment survey seems to have been resolved. For the past three months, the two surveys have been producing results very close to each other.
The Foreign Worker Surge
One aspect of the household survey that has received a lot of attention is the gap between native born employment and foreign born employment. In August, the number of U.S. born employees fell by 1.3 million and the number of foreign born employees rose by 635,000. Over the past 12-months, native born employment has contracted from 131 million to 129.7 million, a loss of 1.3 million natives from payrolls. The number of foreign-born employees has grown from 30.4 million to 31.6 million, a gain of 1.2 million.
This does mean that close to all of the increase in employment has gone to foreign-born workers. Actually, the official numbers may undercount the number of foreign born employees because the household survey is probably not picking up a lot of the newly arrived Biden-Harris open borders crisis migrants.
This is not, however, primarily a sign that foreign workers are taking jobs from Americans. What the government calls the “civilian noninstitutional” native population over 16 shrank by 392,000 over the past year. The U.S. born civilian labor force—that is, the part of the population that is able and willing to work—fell by 768,000. In other words, one of the primary drivers of the contraction in U.S. born workers is that there are fewer adults born here who are able and willing to work because our native population is aging, retiring, and dying.
Meanwhile, the foreign born adult population grew by two million, and the foreign born labor force grew by 1.2 million, matching the gain in employment. While that is no doubt pleasing to their employers because it means they can replace U.S. born natives exiting the workforce with foreigners entering it and do not have to compete for a dwindling pool of workers, which would push up wages, it’s not clear that that is something American voters should be very pleased with.
Keep in mind that the new workers will consume as much as they produce—or nearly so. As a result, there’s almost no benefit at all to the U.S. born or even pre-existing foreign population from new workers. Whatever surplus is left over tends to go to the wealthiest Americans, while the wage depressing effects are felt by the lowest income households.
There’s also likely an inflationary effect. Newly arrived workers tend to be less productive than U.S. born or longer-residing immigrants, but they bid up the prices of everything from groceries to gasoline to housing. And to the extent that the U.S. is facing real production constraints, the additional demand simply means higher prices. In effect, the Biden-Harris migrant crisis is a tax on U.S. residents who were born here or arrived earlier.
One likely reason immigrant employment is growing so fast is that newly arrived immigrants tend to work fewer hours per week and fewer weeks per year, according to a study by the Federal Reserve Bank of Atlanta. As a result, when employers substitute natives or permanent foreign-born workers with newcomers, they have to hire more of them to get the same level of output. This has almost certainly inflated the demand for workers.
As we explained last month, eventually these newcomers will catch up to American work levels. But that takes years. So long as the economy is dependent on new immigrant labor for growth, employment levels are likely to be artificially inflated.