Moody's Talks - Inside Economics - Labor Market Yellow Flags

Episode Date: June 7, 2025

Dante joins Mark and Marisa for a rare Cris-free Saturday morning podcast to discuss the May jobs report. Given the report's weakness, the team is equally baffled by the positive news headlines and surging stock market on Friday. The team dissects the large downward revisions to the payroll numbers in recent months and whether this signals a recession ahead. They also debate whether the low unemployment rate is giving a false signal about underlying weakness in the labor market.  Guest: Dante DeAntonio, Senior Director of Economic Research, Moody's AnalyticsHosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s AnalyticsFollow Mark Zandi on 'X' and BlueSky @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Sandy, the chief economist of Moody's Analytics, and I'm joined by, well, not my two trusted co-host. I'm missing one of them. I see Marissa. Where's Chris? I'm trusty. You're definitely trusty.

Chris has jet off to Europe. Oh, this is his month-long bacon in Italy. His goes back home. That's right. Yeah, this is when he gets a chance to sip wine in his cellar and play Bucci. Remember? Bachi. Bachi, Bucci. Oh, we're going to miss him. Darn. Will he be back next week or is this for the whole month?

I think that he will be back next week. You will be? I think so. Okay. All right, good. Well, we'll miss him. Well, it's good to have you. And we've got Dante, Dante, Dr. D'Antonio. Hi, doctor. Hi, Mark. How are you? I'm doing okay. And if it's Dante, it's jobs Friday.

But this is Saturday, not jobs Friday. It's right. It's kind of nice because we've had a whole day to digest the jobs report. Yeah, it's good. Yeah. Well, I had a day-long meeting at the CBO Congressional Budget Office. Those are the first to do the budget for the U.S. I'm on the Economic Board of Advisors there and they meet, I think it's twice a year, maybe three times a year.

And it's like a really fun day because we talk about, you know, specific, half a dozen topics that are relevant to, you know, obviously the economy, but also to what the CBO does. It's on Chad them House rules, so I can't really talk about it. But there's, but there's nothing secret about it. But it's actually a cool day. They've got, you know, like Gregory Mankew and Bob Gordon and Jim Peturb. Just a really cool group of folks. And they allow me on the panel because I'm a practitioner, right?

It's kind of like what they need. We do the same kind of thing they do, right? They have a model of the macroeconomy. and use that to figure out what's going on with the budget and the outlook. And so, but it's a really fun day. But the result is we couldn't record the podcast on a Friday. So here we are Saturday morning. Got a little bit of perspective.

And Dante, maybe I'll turn to you first. You want to give us a bit of your sense of things? Sure. I think there's some mixed readings of the job support this month. The headline sort of tells one story. And then I think if you dig in just even a little bit, you get a little bit of a different story. So top line job growth was 139,000 in May, which was slightly above, you know, consensus expectations. I mean, let me stop you for a second.

Yeah. Really above consensus expectations? Like, what was consensus expectations? It's like 130. Oh, 120. So literally above expectations. Just above, yeah, slightly out. All right.

Just asking because we're going to come back to the stock market in a minute because I'm confused totally with the seeming reaction there. But anyway, I stopped you. Go ahead. Put it another way. It wasn't weaker than expected, right? It came in line with expectations. You know, the average gain over the last three months is still $135,000. The unemployment rate, obviously, the other headline piece of news that the unemployment rate stayed at 4.2%.

So I think that's, you mentioned, the positive stock market reaction. I think you see, you know, job growth in line with expectations. You see the unemployment rate of 4.2%. It hasn't changed. And people sort of stop there and say, okay, that's a pretty good report. To the second significant digit? It was actually up a little bit. Third significant digit, I should say.

It's 4.244%. Just on the cusp of moving up to 4.3%. You're telling me, you're telling me, Dante, if we had gotten another 0.001-235 on the unemployment rate, and it rounded up to 4.3, we would be looking at this, the world would be looking at this report differently than it does today. That's what you're saying to me. I mean, I don't know that it would be drastically different if it only ticked up to 4.3%. But I do think people would read it slightly differently if the unemployment rate actually increased

versus staying the same. I know, bizarre. Okay. Go ahead. If you look at the industry breakdown, not particularly favorable in terms of job growth, you know, almost all the job growth in May came from health care and leisure and hospitality, which is sort of a story that we've seen before, right? If you go back to late 2024, it was a similar story where leisure hospitality and health care,

and at that time, the public sector were the main drivers of job growth. We've obviously lost the public sector at this point. Government was down 1,000. It's basically been flat now over the last three months. And that's primarily because federal government payrolls have finally started to decline here over the last couple of months. State and local government still rising a little bit. But job growth is increasingly concentrated in just a few industries. there really were no other big gains to speak of.

I added 13,000 jobs in finance, but outside of that, it was pretty weak report across industries. And I think the biggest negative story is the revisions to prior months, right? So even though May looked okay, you had a combined downward revision of 95,000 jobs between March and April. So if you go back and look at the first quarter of the year, right, January, February, March, those are now final estimates. There's no more revisions coming.

and job growth there is pretty weak, right? It only averaged about 110,000 through the first quarter of the year. Is that right? So average monthly job growth in the first quarter, January, February, March was 110K. I think it was 111, but yeah. Yeah, after revision. And it started much higher than that, right? If you look at the first prints in the first quarter, you had 143, 151, 228, right?

So you were talking about an average that was 175 probably originally. and now it's down to 1-10. So revisions have been pretty consistently negative. I think that's part of the pessimistic story. The other is, you know, if you look at anything... Can I ask on that? So April and May have also been revised lower, but we've only got...

We haven't gotten full revisions in. We haven't gotten any revisions. Obviously, we just got May. But April, we've got one more set of revisions coming. That's right. April was down to 30,000 on the first revision. It will still be revised again. And for March, you actually had...

It was down. 43,000 in the first revision that we got last month, and then it was revised down another 65,000 this month. So it was a total revision of almost 110,000 for March. Right. And just quickly, for the listener, why is this data revised? So the biggest factor is that you, you know, when they've produced the estimate for the first time, so the May number that we just got, they don't have all of the sample responses in at that point, right? The sort of sampling period here is pretty small. So they use whatever information they have at that moment, you know, businesses that have responded to the survey to produce the first estimate. As time goes on, they get more and more responses

for May employment levels. And so that, you know, additional sample that comes in obviously influences the estimate. They also do reestimate the seasonal adjustment factors as well, but that typically plays a smaller role in the revision than just the new sample information. And we're getting consistently downward revision. So, you know, since the beginning of the year, feels like almost every month, we get down revisions to the previous two months as the, as you say, more data comes in. And that tends to happen, correct me if I'm wrong, when the economy is throttling back, when it's starting to really slow, you know, because of the way the BLS calculates these

estimates, kind of fills in the blanks, they kind of overestimate things when the economy is kind of throttling back. And conversely, when it's starting to re-accelerate, that's when you tend to get consistent upward revisions to the data. So these revisions would be consistent with the view that the labor market is, I use the word, throttling back. Is that fair? That's fair, right. If you go back to, say, 2021, there were big positive revisions a lot of times because the economy was adding a lot of jobs. It was hard to sort of keep up with the pace of job gains. Now you're on the other side of that where, you know, with limited sample information, it's sometimes hard to get a read on exactly how many jobs were lost.

And so as you get more information in, it becomes more clear oftentimes. Okay, so we got an average of 110 per month, 111, 111, you said, K, per month in the first quarter, feels like, you know, we got April being revised down. We got the May date at 139. That feels like it's going to get revised lower, you know, once we get next month and the month after.

So what do you think, and I keep asking, I ask you this every month, What do you think underlying monthly payroll job growth is, you know, abstracting from the vagaries of the data? What's the reality here? What do you think the number is? It feels to me now like we're closing in on, you know, $100,000 being the trend, whereas late last year, I think we were still talking about $150, maybe being the trend. But it feels like we've definitely slowed from there. Right.

And I think average monthly job growth last year, correct me if I'm wrong, in calendar year 2024, was like 168 to be. 167-168. That was average monthly job growth. So now we've gone, that's a pretty size, it feels like a pretty sizable step down in growth. Yeah, agreed. Yeah, it feels like we've definitely sort of level shifted here in the beginning of 2025. And the other point you made was, you know, it's, the job growth has been relatively narrow now for about a year. It's got, it feels like it's getting even narrower with the loss of the government without, you know, federal government's now pretty big job losses because of Doge and other cuts. So it's, it's, gotten even more narrow. It feels like, not to be cute, but it feels like hospitals and restaurants.

That's what it feels like. Yeah, I mean, at least for May, that was almost exclusively it. And it feels like restaurants, you know, could go at any second. You know, Lijon Salty has been, has sort of oscillated over the last couple of years. You know, healthcare has been strong throughout, you know, the last four or five years. But. Right. So it feels like we could be in a world in the second half of 2025 where health care is basically the only, you know, driver of growth at some point. Yeah, I know there's this so-called diffusion, is it diffusion index? Yeah, yeah, like a one month, three months, something like that, where they look at the percent of industries covered by the Bureau of Labor Statistics to calculate this data, what percent are adding to payrolls. And I don't want to take

anyone's stat for the stats game, but do you know what that is? I didn't see it. I didn't look. It was exactly 50. 50. 50. 50 on the nose. In context, is that high, low? What is that? That's pretty low. I mean, since that means that half of industries are adding to jobs, half of industries are not. I think since 2020, right, when obviously it was very low.

I think it's only been less than 51 time. There was one month when it was below 50. So this is, you know, the second lowest reading we've had since we came out of the pandemic. Right. Okay. Once you get close to 50, that's indicative of much slower job.

You know, it's hard to generate huge job gains when you've got half of industries that are not adding to Well, in the 50 that are, they're not adding a whole lot, right? I mean, it's pretty much on the margin, to my eye. Okay. Okay, I stopped you. Well, that's kind of the payroll survey. So there's two surveys, one of these payrolls or establishments, the other businesses,

the other of households. We'll turn to that in just a second. But before we do, so to put words in your mouth, what you're saying is the top line number 139K, that was the increase in the month. That was a little bit above consensus. But the realities, if you kind of look under the hood, even a little bit, it just feels a lot softer than that. That's what my takeaway is from what you're saying.

Yeah, I think that's fair interpretation. Mercia, on the payroll survey, anything there that you want to point out that we missed, that Dante missed? No, I'll just underscore that revision that he mentioned. So the revision for March, right, we've gotten all three readings now on March. Dante said the revision between the first and the final is down 108,000. That's the largest downward revision since March of 2001. And you've never seen a revision that big unless we're in a recession or coming out of a recession.

So if I look all the way back in history, you don't see revisions like that unless we're in a recession. Wow, that's interesting. So if you accumulate all the down revisions to the March of 2025, it's just over 100K, and you're saying, when you go back historically and look, if you get down revisions like that, you are in recession. Yeah, or you're coming out of it. I mean, you're either in a recession or you're right out of it. I guess the other-job growth.

That's very interesting. I guess the other point on the revisions is there's all, you know, another big revision coming, right? The so-called benchmark revision. That's- Right. This revision we're saying now is just because we're, you know, there's delays in reporting by the businesses or establishments. And as we get more reporting, it's showing increased weakness.

But we also get once a year this benchmark, so-called benchmark revision where the, the data based on the survey is benchmarked to actual employment accounts from unemployment insurance records. So it's like it's kind of a census. and typically in you're in this kind of environment in a thralling back in the economy, those revisions are also going to be down. So it could very well be the case.

You know, of course, I'm forecasting, but it feels like it could very well be the case that when all the data is said and done, comes in and it's all said and done, that we could already be below 100K, right, Dante? Yeah, 100%. Yeah, I mean, I think we could already be slower than that, yeah. Okay.

It feels like I'm leading the witness, but I guess I'm... We're not in a courtroom, So it's okay. Yeah, it's okay. Yeah. Okay. Anything else on the so-called payroll survey before we move to the house? Because the household survey is kind of interesting.

There's a lot going on there as well. Okay. So you want to talk a little bit more about the household survey and unemployment? One thing that strikes me about the unemployment rate is it's actually risen quite a bit over the past year, right? I mean, if you go back a little over a year ago, it was hanging around three and a half percent. And here we are at 4-2, just south of 4-3, you know, that's not inconsequential. No? I mean, most of that increase happened like late 2023 into the first half of last year, I think.

So, like, I think over the last year, it hasn't actually moved all that much. We had a period where it did. Are you saying if I go back to early 2023 since then it's up, but since this time last year, not quite as much? Okay. Yeah. It was 4% exactly a year ago. 4% exactly.

Yeah. Okay. Okay. And I guess the other point you'd make on that is, well, that might be a feature, not a bug because the Fed Reserve was working hard through higher rates to slow things down, cool the labor market off, get unemployment up a little bit. And that's what they got. So we went from three and a half. And from their perspective, that was too low. It was leading to inflationary pressures. Now we're back over four. That would be consistent, you know, more consistent with what they'd want to say. But if it goes any higher than this, I would think, you know, some concern we would. start to develop about what that means. Yeah. Well, I was just going to say it's funny that exactly a year ago, so May of 2024 is when it hit 4%, and since then, it's been above 4%. So like before May of 2024, it was solidly below 4%. It was in the threes, as you mentioned.

So it was really a year ago that it started to be above 4 consistently. Okay. Okay. Okay, sorry, Dante. Anything else on the household? I've got something else to point out, but let's see if you go there ahead of me. Yeah, I think, well, I'll talk about a couple of specific numbers in, too, but I think part of the issue, people, I think, have a little bit of a hard time reconciling.

If you go back that period when the unemployment rate was rising, right, we had job growth that was strong, right? So you had the labor market softening, right? The unemployment rate was rising, even though job growth was still very strong at that point because we had huge amounts of labor force growth, right? And now we're sort of in this opposite world where job growth is slow. but now it doesn't seem like the labor market's softening, right? Because the unemployment rate's basically holding steady.

But that's because labor force growth has basically gone away, right? So it feels like this hard story to reconcile because job growth is getting softer, but now the unemployment rate's not rising anymore. So I think that's part of where some of the confusion around what's happening and how to read what's going on in the labor market stems from. Outside of the unemployment rate, the household survey was very weak. I mean, basically any other measure you look at other than top line unemployment was pretty bad, right?

Labor force growth, the labor force shrank by over 600,000, right? Labor force participation was down both in total and for prime age workers. Employment to population ratio was down, both for everyone and for prime age workers. Household survey employment declined by almost 700,000 jobs. So, I mean, really just a pretty pessimistic story outside of the, hey, the unemployment rate is still 4.2%. But other than that, it's pretty weak. Yeah, that's exactly where I was going to go on Labor Force. I mean, we went from this, if you go back a year or so ago, Labor Force was booming, you know, because of the surge in immigration.

And now, of course, with the crackdown on immigration, it's almost been a year now since that happened, right? So immigration has really come off. And it feels like it's starting to show up in the labor market with much weaker labor force. And even with this weaker labor force, we're getting this unemployment rate, you know, notching higher. Now, it probably feels like it's going to be the case here that the immigration is going to remain weak for foreseeable future, given immigration policy, the deportations and everything else that's going on. Visa, you know, the issues around student visas, you know, symptomatic of that, you know, crackdown on immigration. So that would argue feels like that, you know, it will limit the increase in unemployment, you know, here, you know, going forward. Despite the weakening in job growth, because you don't have as much folks coming into the labor force, it just keeps a lid on unemployment.

It makes it less likely unemployment is going to take off here. Now, my question is, from the perspective of what it means for broader economic activity, is the limiting of the unemployment rate? Historically, let me put it this way. When you look at historically, you see a significant increase in unemployment, that goes to the Psalm rule that, you know, it kind of triggers this self-reinforcing vicious cycle where you get unemployment, causes consumers to turn more cautious, causes businesses to cut back on jobs, causes unemployment to rise, you get into this kind of vicious cycle and you go into recession. It feels less likely that that dynamic is going to play that because unemployment is not going

to rise as much that you're going to get the same kind of dynamic. Or does that really, you know, maybe the increase in unemployment doesn't mean the same thing as it has historically because the job growth is slowed, but we're not seeing the same crease in unemployment. You see what I'm saying? I'm saying this. I'm kind of not articulating this well, but do you get my drift? I mean, I get what you're saying.

I mean, if we end up, if we're moving towards a full-blown recession, the unemployment rate is still going to rise pretty meaningfully, right? Not as much. Maybe not as much, but we're in a world here where it's going to be harder to get that initial movement to happen, right? The sort of break-even amount of job growth that we need is pretty low. Right. So even if job growth is 100,000 a month, the unemployment rate might not move at that point, right? Even whereas a year ago, if job growth was 100,000 a month, you'd see the unemployment rate pushing higher now.

That might be enough to sort of keep things steady. So as the labor market is slowing, that initial upward movement in the unemployment rate will be, I think, a little bit harder to get. But if you end up in, you know, full-blown recession where layoffs are spiking, then the unemployment rate is still going to rise pretty fast and pretty dramatic. I would imagine. Yeah, I guess what I'm asking, you know, I guess the way I would frame it, given what you just said, is, you know, historically it's the, it's almost the increase in unemployment, which reflects, you know, layoffs and a weakening in the labor market that feels like, sort of like a catalyst for igniting that self-reinforcing vicious cycle. And in the current context with weak labor force, if we don't see that increase in unemployment, is that, does that mean

it's less likely that vicious cycle takes hold or it doesn't mean that at all because the labor market is actually quite weak despite the fact that the unemployment rate's not rising. Does that make sense? That makes sense. I think my, you know, to me, like there's obviously if there's a dual headline, right, the unemployment rate, but also job growth. So if job growth goes negative. Yeah, let's take a good job growth and it goes negative, right?

You know, historically if you look, so, you know, you have the Psalm rule that looks at the unemployment rate and it's, you know, sort of relationship with recession. but historically if you have even two straight months of negative job growth, right, you're in a recession already. So to me, even if the unemployment rate is not really moving, if you do get those negative prints on job growth, that probably has the same psychological effect on consumers that the unemployment rate would have. Usually they're happening at the same time. Right. But to your point, maybe they sort of diverge a little bit here this time because of the dynamics of the labor market. But I still think one of them going off the rails is probably bad enough.

Right. And the kind of thing that makes me look queasy with regard to, you know, whether it's all means about recession or not is despite the very weak labor force, last month, big decline in labor force. And overstates the case, obviously, but, you know, it's making a case. Labor force participation fell two-tenths of a percent, I believe, which is pretty substantive. You mentioned employment to population. So despite that, you still saw the unemployment rate to the third significant digit continue to push higher, right? That means the number of unemployed is now rising here. So that, you know, this makes me feel queasy about that. Mercer, do you want to weigh in on that bit of the conversation we just had about, you know, do we need to see the unemployment rate

rise before it kind of triggers that self-reinforcing vicious cycle or not? Is it just about the jobs and the job, whether we have job growth or not? I think I agree with Don I mean, I think if we start to see negative prints on employment, then we're going to see the unemployment rate rise, right? It may not, we've been at such a low level that, yeah, you're going to have to have a meaningfully weaker household survey than typical because it has to offset those declines in the labor force. But I think if we start getting outright job declines,

I mean, going back to your comment about the stock market, you know, investors, traders, whoever's looking at this are very, very sensitive to that top line job number. And you always see headlines around it. So I think that that would be very psychologically damaging to get negative numbers here on non-farm payrolls. You know, we look at the unemployment rate and it's funny kind of, right, because they don't look at anything else. They don't, they look at the unemployment rate and they look at the payroll number and the market reacts to that without digging any further into the jobs report. You know, there's no context as to what's going on with either of those numbers.

And there's a reaction. But certainly, so having said that, if they're not looking any deeper and we see negative payroll, that's going to be, that's going to be bad. Everyone's going to know about that. So what you're saying is hard to ignore very weak job growth or actual negative signs on the job numbers, even if unemployment's not pushing up a significant degree. It's not going to matter. That's right.

It may, it has some implication, but it doesn't preclude the risk that we're, you know, headed to a recession. Yeah. Yeah. And even in this report, right, if you look at the breakdown of the labor force, didn't actually see a huge rise in the number of people unemployed, right? It was mostly that you saw this big decline in employed people that were in the labor force. and you saw a lot of any increase in unemployment,

mostly came from people that were reentering the labor force or new entrance to the labor force. So you're still not seeing in the household survey this big increase in unemployment. So, and that would be indicative of a recession, certainly, right? We need to see layoffs happen for a recession to be underway. And once that happens, then you'll see the unemployment rate move higher. Well, I'm going to take my stat for the game to your point.

The share of workers that transitioned from employment to out of the labor force was 3.3%, which is very high. You know, that's a big spike. And it may be related to the doge cuts because I do think, you know, this goes to kind of deferred retirement. You know, a lot of government employees. got this deferred retirement, their retirement doesn't actually begin until September, but they go on, they go on, I think, like a leave starting in May. They started that in May. So it could be the case that all these folks that are leaving the labor force are those government workers. They're not counted. They may ultimately end up in unemployment. They may ultimately,

if they come back into the labor force, but they're out of the labor force now. And they're not They're not counted as unemployed, but that caused that jump. Okay. So, Dante, broadly speaking, in the context of what is this, the recession watch, are we going into recession? How do you think about this report? How does that fit into that concern about recession? I still don't think it signals imminent recession, right? I mean, even with the downward revisions, right, we're still talking about job growth that's, you know, probably at least at 100k a month through the first five months of the year.

And with everything we just talked about, right, that's probably enough to sort of sustain the labor market as it stands right now, given, you know, weak labor force growth. I think the question is just, you know, what happens with tariffs, you know, is sort of the initial impact from tariffs baked in yet? Or is, you know, is a lot of that still to come? And then also you've got, you know, I think the government job law. are only going to continue to ramp up from here, right? I think we're just seeing sort of the tip of the iceberg in terms of them actually showing up in the payroll report. So if those are still two big headwinds out there that are going to weigh even more on, you know, sort of the next few months of employment, that could easily push us from 100K much closer to zero. And that's when I would start to get more concerned about, you know, sort of the state of thing.

So it doesn't make me feel better about the current situation, but it also doesn't sort of signal that red flag to me just yet. I mean, we could continue on with 100,000 jobs a month for a long time and everything could be fine. I just worry that there are these big headwinds that haven't been fully absorbed in the data yet and, you know, could weigh a lot more heavily moving forward. Same a question to you, Marissa. I mean, given this report, how do you think about this? What does it mean for recession going forward? I think this is a weak report. I mean, it's the first one I've seen that worries me.

And I agree. I think when you look at the doge cuts, they weren't as big as we were expecting. But I still think there's a lot of private sector fallout from that that hasn't happened yet. So I'm still reading headlines about private sector contractors that have big federal contracts that are starting to now lay people off. Right. I think there's a second order effect on that that is. underway, maybe just getting underway. So I think we're actually going to see a lot more fallout from that in the private sector that is yet to come. I think your comment about this, you know,

people, federal workers that took this buyout or deferred retirement now that's starting to show up. I didn't realize that was happening in May. And I think they officially go off the payrolls in September, right? The people that took. of that buyout, which means I would expect we're going to see another wave of this, probably between now and now and September happening. So, you know, my probability of recession is pretty high, and this certainly doesn't do anything to lower it. Right.

So going back to the stock market, it had a really good day on Friday. And right out of the gate, you know, the job numbers were released that. 139K, the 4.2% unemployment, the headline, and the futures took off and didn't look back. It, you know, obviously it's hard to ascribe any one thing to what's going on in the stock market. I hesitate to do that. But it feels like investors took solace in the report that, you know, this was consistent with the idea that we weren't going into recession. Yeah, I took a picture yesterday of this headline because I thought it was so weird. It was in CNBC, and it says Dow rallies 300 points on strong jobs report.

Right. S&P 500 top 6,000. And I went, wait, what jobs report are they looking at? And then I read the article. And it's all just the stock market rallied because the 139 is bigger than the 125, which was consensus. Yeah, the only thing I can think of is that the market was positioned for a much weaker number than the consensus, right? Because we had gotten some other data that suggested

it maybe it was going to come in weaker. And there was kind of a relief that, oh, it wasn't great, but it was much better than we feared. So the consensus was not really the market's consensus, if that makes sense. But that's the only way I can square the circle. Dante, any views on this? You know, I mean, I think that is the only thing that makes sense to me, right? If everyone's expecting the bottom to fall out and then it doesn't for another month, then that's somehow good news, you know, in that way. Right. Right. Okay. Looking at other data in the labor market and what it might mean for, you know, the job numbers going forward, the other thing that maybe this is one of the data points to the market was kind of focused on was the

increase in unemployment insurance claims. We've been following that carefully. Initial claims are a good barometer of layoffs and they've been relatively low. And it does feel like in the last couple, three weeks, they've been pushing up. Anything to read there, Marissa? Anything in the UI claims? I mean, they pushed up a bit. They're at, they were at 247 on Thursday, which reflects where they were a week ago. But we've seen this phenomenon happen in the last couple summers where at the start and middle of the summer, we've seen jobless claims rise and then fall back. And we were looking at that, you know, our colleague Matt Collier was looking at that yesterday and think some of this is just residual seasonality in the data coming from the pandemic. But so it's not, claims aren't at a level yet

that suggests that we are in a recession or that we're going to see a large increase in the unemployment rate. It's probably too soon to see if this is real versus just the, this seasonal thing that keeps happening every summer. But yeah, I mean, claims are up a little bit, but it's not, I don't, I'm not convinced this means massive layoffs yet. Right. Okay. Okay.

All right. Anything on that, Dante, or any other labor market data? Because Joltz came out, the job opening labor turnover survey came out. I didn't really see anything there that kind of stood out for me. But any other labor market data you're looking at? Yeah, if anything, Joltz kind of signaled the hiring was up a little bit. It's one of those where I think it was just a volatile month for Jolt, and I would expect things to sort of revert back to their sort of downtrends next month.

But your openings were up a little bit. Hiring was up a little bit, which is not really consistent with what we're seeing elsewhere. But the Jolt's data does tend to be pretty volatile on a month-to-month basis. So I don't really read into that at all. Yeah, I mean, claims, the other thing is maybe people were sort of conflating that increasing claims and thinking that this report might be worse. But, I mean, the timing of claims was too late in the month. it could, you know, if it's something real, it could signal weakness for June, but it was too late for

to have any real impact for the May report. So, I mean, we'll have to wait and see what happens the next few weeks, but. Right, right. Okay. Yeah, you know, the, the kind of the, the concern that I have, well, maybe I'll come back to this after we play the game. Let's play the game. Let's do that because I don't want to take any more statistics, because I've already taken a couple of mine already. I'm down to the bottom of the barrel, but let's play the game. We each put forward a stat. The rest of the group tries to figure it out with clues, deductive reasoning, questions.

The best stat is one that isn't so easy we get it right away, one that's not so hard we never get it. And if it's apropos to the topic at hand, the job market all the better, but it doesn't need to be. So we always start with Marissa. Marissa, what's your stat? Well, I came in here with three,

and we've kind of talked about all three of them. I'm sorry, I'm sorry. So, and my stat was going to be that 108 revision. I didn't think we'd actually talk about it, and Dante called it out. Okay, so here's my stat, which we've sort of danced around. Minus 791,000. I know what it is. I know.

No, does Dante, because it's Dante's favorite number. It's the household, the decline in household employment on the payroll survey basis. Correct. Ah, and Dante was gracious to let me say it. You knew that number. I did. Yeah, yeah. Well, that goes back.

to the weakness of the household survey. You want to explain? Yeah, and that's another one where, so when you put the household survey, when you adjust it to the payroll survey concept, so you add in multiple job holders, you take out agriculture, you take out the self-employed, you do all these machinations to get them on the same conceptual level, you would have a decline in household employment of, as I said, 791,000, almost 800,000. That's another number that you never see a number that big unless you're in a recession. So we saw, we saw numbers that big back in the height of COVID in March and April of 2020, but then you have to go back to the 08 recession, the financial crisis, to see a number that large of a decline in the household survey. Never

see that in an expansion. minus 790. This brings up another issue that's kind of come to the fore, and it's about the quality of the data itself. Because of the cuts in government employment, the Doge cuts, it's cutting into the jobs at statistical agencies, like at the Bureau of Labor Statistics. And there was actually a really good report

about what it meant for the Consumer Price Index CPI, because you've got a lot of BLS folks that go out in Canvas for prices. And because there's fewer of those folks, the BLS is making up, well, that's what I think that's imputing. Imputing. Imputing, yeah, imputing is the right word.

Imputing the data. They, they point, the BLS is saying it's no big deal, certainly not with regard to what it means for the top line numbers, the overall CPI. What do you, how, in the case of the household survey, do you think there's something we should,

should be worried about here in terms of the quality of the data? I do. Now, specifically, I look at... Thinking as a former BLS statistician, you're both former BLS statisticians, as I recall. Well, economists, not statisticians. Oh, sorry. You took umbrage to that. Yeah, I'm in a...

Well, I wasn't the one crunching the numbers. Oh, yes. For the statisticians, right? Yeah, exactly. So... She seems like she was a little peeved at that, didn't you? Would you have been annoyed if I said status? No, I was, I was just giving, you know, giving props to statisticians.

Accurate historical. Don't call me a statistician. Okay. Not as smart as them. I looked at the response rate to the household survey this month. It wasn't, it wasn't concerning relative to prior months. In fact, I think it was higher than it's been in prior months. So nothing to be concerned about in terms of the quality of the data.

this month. I just think overall, we've seen response rates falling for a whole host of government surveys, right? And that's been kind of a structural thing that's been happening over time. There's been a particularly concerning thing that's happened in recent months, which is that these advisory committees for federal statistical agencies has been disbanded by the administration. and these are people that advise the BEA and the Census Bureau and the BLS on the stats and the production of them. And that's been disbanded. We also know that funding has been cut. As you mentioned, jobs are being cut.

So, yeah, I'm concerned that over, at least over time, I'm not concerned about any particular report, but over time, the quality of the data has certainly declined. We know that just from looking at the response rates. And that goes back to revisions to data. It's another reason you'll get big revisions. If the response rate is really low, that means half the people are 40% of the respondents aren't responding in a timely manner. So as you chase these people to respond to your survey, you're going to get bigger revisions

in one direction or another simply because it's harder to collect the data. Right, right. Yeah, the other thing I, this is tangential, but I just came across the transom was I guess the there's in this reconciliation legislation that's making its way through Congress, there's some discussion about significantly cutting back or even eliminating the Office of Financial Research, the OFR, which was established after the great financial crisis to kind of scour the financial system for vulnerabilities. That feels like a pretty bad idea to me, especially at this point, given everything that's going on in the financial system. but okay um okay uh dante what's your stat

which one let's see let's go with um he's like he's got the riches of stats i have two and i'm torn between the two we can do both we can do both are negative 37.1 000 is it jobs it is jobs so is it a decline in jobs during the month of may in some sector or some group It's not from May. Oh, oh. Is it a revision to an industry? It is a revision to an industry, yes. Federal government?

Not federal government. Temp jobs? What's that? Temp jobs? Not temp jobs, no. Not government, not temp jobs. Think trade war. Manufacturing?

Transportation. distribution? Transportation Warehousing. So the April revision transportation warehousing was down 37.1,000. So the initial estimate was up 29,000. The new estimate is down 8.1,000.

And actually, there was also a large revision to March as well. It was down a little over 23,000. So the combined revision just in transportation and warehousing was over 60K in this report. So we talked about that, you know, 95,000 in total revisions,

two-thirds of that was just in transportation and warehousing, which I think goes directly to the impact of, the early impact of the trade war and sort of lack of flow of goods coming in and a sign that likely things are only going to continue to fall from there. There were also down revisions in government from federal government as well, but they were smaller, I think, 9,000 in each of March and April. So most of the revisions were from government at transportation. It would be weird that the government would be revised down.

it? Yeah, even for the federal government, they don't have, they don't always have complete counts on the first print for whatever reason. You think interesting. I could figure it out. I think I remember that federal government is like the worst in terms of all the industries that respond to the payroll survey. Ironically, the federal government is the worst. That's funny. Oh, so, well, this goes back to the point that at turning points, that's when you get these big revisions, you know, up or down. And that's consistent with that. So that would as the trade war continues on here, it feels like we're going to get more downward revisions to those numbers.

Yeah, and it just starts to make more sense. I think I was scratching my head a little bit when you think about in April, you know, transportation warehousing, adding almost 30,000 jobs didn't seem to square with what was happening. And now it makes more sense. What about manufacturing? I mean, because that's the other,

you would think, sector that would struggle here with the trade war. And, I mean, it was down $8,000 in May. And it's been, it's been weak for a long time. And it is down a little bit in recent months. There just haven't been any huge losses, but it continues to be soft.

Right. Because if you go back to the trade war under President Trump's first term and take a look at manufacturing, both production and employment decline. You know, ironically, you know, the tariffs are designed, you know, intended, at least the stated intent, is to increase production and employment, but does just the opposite, at least in the near term. Okay, you want to do your other stat? Is it a good one? Might as well.

You'd be the judge of whether it's good. Saturday, I'm not going anywhere. You're going anywhere? I'm not going anywhere. All right, the other stat is minus 56,000. Is it another industry? It's industry, but this is not a revision anymore. Right, but is it just an outright decline in jobs in an industry?

It's a decline. It's not a single. month decline. Humulative decline in federal government jobs. That's right. So far this year, federal government, so it's actually down. That's done. That's done, Marissa. Yeah, I wish I could do that. Someday. You know, this, we think there's more to come, sure, but even at that level, it's already large, right? So, you know, you have to go back to 2013 to get a bigger decline in a single calendar year. So, federal government payrolls fell by 65,000 in 2013. And that's high, right?

You have to go back to the mid-90s to get other declines of that size, right? So throughout the 90s, you had sort of consistent declines in federal government payrolls. But it seems like we're on pace here for federal government payrolls to decline by well over 100,000, if not more this year. That would be by far the biggest decrease in a single year going back to 1990s. I mean, it just, it's highly unusual, right? The pressure that we're likely to see from the federal government here throughout the rest of the year is not something that we have seen, at least in the last 30 years in terms of the

market. It feels like given what we were just saying about deferred retirement, it feels like, I mean, well, I guess in this, what's like in this case, how does that work? So if someone take deferred retirement, it starts in September, but they actually leave. They're still on payrolls. They're still on payrolls. Okay. Right.

Because they haven't counted into the payroll jobs yet. That's right. And I think there's like roughly like 75,000 people that did that. So we know they're coming. That's coming. Right. And even a lot of the actual layoffs, I mean, a lot of those are still tied up in legal battles. Right. So I think a lot of the decline we've actually seen so far is just attrition, right? Because there is, I don't know if there's a full hiring freeze in effect still, but, you know, there was at least some form of a hiring freeze in effect that I think is likely driving some of this early decline. and then we're likely to see the impact of the actual layoffs and deferred resignations come later this year as legal challenges play out and then as we get to September.

So I think we're just really scratching the surface here of the decline we're likely to see throughout the rest of the year. So that's a pretty significant headwind, you know, dead ahead. Yeah. Right. Okay. And I would think at the state government level, state and local, they ought to be turning more cautious too in their hiring given, you know, what's going on with Guard to reconciliation legislation and what it means for their own funding. I mean, if Medicaid is cut back, that puts the onus on states to try to fill the void,

and they're going to be under a lot of financial pressure. So, okay. Yeah. Okay, that was a good one. All right, 15.6 million. That's my stat. 15.6 million. Is it a jobs number?

Nope. No. Sorry. Is it something that came out this week? Yes, I, yes, it did. It came out this week. You had to think about that. 15.6 million.

Oh, was that vehicle sales? It was vehicle sales. Oh. Yeah, very good. Yeah. Vehicle sales on the month of May, 15.6 million. I bring that out because that's way down from what it was the in March and April. I think it was 17.5 million.

These are annualized numbers, you know, 17.5 million in March. And I think close to that in April. and 15.6 is kind of sort of back to where it was before the big jump in March and April. And of course, that goes to kind of the forward buying. You know, a lot of people bought cars in advance of tariffs. And that juice car sales up in March. We talked about this earlier, but I bought a car merchant, you know, well before I was going to actually buy because I wanted to get ahead of the tariffs. and I was joined by a lot of other people.

And it feels like to me that we still have more of a backside here, right? I mean, if the underlying rate of vehicle sales was 15, 5, 15, 6 million, because that's kind of sort of where it was all throughout 2023, 2024, and then you got that pop. The concern is that there's going to be a further backside to all that forward buying as we, you know, move into the summer months in, fall, and we see, you know, a further weakening in consumer spending. And by the way, spending has been weak. I mean, if you look at real consumer spending growth through the month of April, the last data point we have, and kind of year-to-day to annualize it, it's just about 1 percent, a little bit over 1 percent annualized, which is really on the soft side.

And that's including this forward buying, this in anticipation of the tariff. So it does feel like to me we've got some real weakness in consumer spending debt ahead, because of the payback here. And if that happens and businesses decide, given everything else is going on, that they start pulling back further on their hiring and engage in more layoffs, then, you know, that's the fodder for a real problem, a recession. So, you know, I think that this 15.6 million is kind of a, you know, kind of a, a harbinger of, you know, potential problems down the road. Make sense? It makes sense.

Yeah. And we got trade data this week, right? So we saw the impact of that buying, pull forward, buying. We saw that the trade balance was basically cut in half in April because you saw this surge in buying in February and March. So that certainly is showing up in the data. Yeah. And it was all in goods, right? it was all buying of goods.

So the service balance kind of didn't change. It was really the goods buying. Well, okay, you know, I've lost my screen. You can see me, but I can't see you. I think we covered a lot of crowd. I want to go figure out what happened to my screen. So maybe we'll cut this a little bit short. Anything else before we call it a podcast, guys, Dante?

Anything else that we missed? I don't think so. Nothing we missed. I think a lot to keep an eye on moving forward in the labor market. Okay. And Marissa, anything? No. No, I think we covered it all.

Wish me luck with the screen. I was the weirdest thing. It just went blank. Nothing makes me more nervous than losing my computer screen. Well, maybe you need a new one. Yeah. Jeez. Jeez, Louise.

Okay. With that, dear listener, we're going to call this a podcast. Talk to you next week. Take care now.