Unprecedented Surge in Government Workers in Latest Jobs Report

Overview of the Jobs Report

At first glance, the latest jobs report appears impressive with a significant surge in jobs according to both the household and establishment surveys. This indicates a strong rebound from recent monthly weakness. Coupled with a drop in the unemployment rate and upward historical revisions, it suggests that much of the recent labor market weakness may have been transitory. However, the increase in wage growth suggests that inflation is also back.

Analysis of the Jobs Report

Part-time workers have traditionally been used to mask weakness in full-time jobs, or foreign-born workers surging at the expense of native-born. This month, however, there was little of that, with part-time workers dropping modestly as full-time workers rose. Native-born workers actually rebounded from a five-year low as foreign-born workers dropped from an all-time high.

Government Workers' Role in the Report

What stands out in this report is the number of government workers, which surged significantly. This increase was not only instrumental in pushing the Household Survey print much higher, but it also made a difference between a 4.1% and 4.5% unemployment rate. In September, the number of government workers as tracked by the Household Survey soared by 785K. This was the biggest September surge in government workers on record.

Significance of the Surge in Government Workers

While the number of government workers soared by the most on record, private workers rose by just 133K. This would indicate that the recent labor market malaise continues. What is odd is that while September traditionally sees a huge jump in not seasonally adjusted government workers, the BLS has traditionally smoothed over this jump using seasonal adjustments. However, this time, the unadjusted number of government workers exploded by a record 1.322 million leading to a record September increase in adjusted government workers.

Implications of the Jobs Report

The credibility of economic reports from the current administration has become questionable, as demonstrated by the recent near-record downward revision in employment when some 818K jobs were magically eliminated. The BLS had a clear motive to add as many "government jobs" as it possibly could, not just to make the sequential increase in labor appear but to depress the unemployment rate further. The reason for jamming a record number of government workers in the September payrolls report might be to drop the unemployment rate to 4.1% instead of rising to 4.5%, and to prevent the market from crashing.

Bottom Line

While the BLS may have done everything it could to put a positive spin on the jobs market, it forgot to change one data set: the number of people who need more than one job to make ends meet, just hit a new all-time high. This raises questions about the reliability of the jobs report and its implications for the economy. What are your thoughts on this matter? Feel free to share this article with your friends and sign up for the Daily Briefing, which is every day at 6 pm.