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        Expert Answers, Finance

        Deceptively 'great': March jobs report isn’t all they say it is

        April 12, 2024 By Jeff Hart as interviewed by Michael Ares

        All News


        The March U.S. employment report released April 5, 2024, was met with hearty cheers from financial reporters and Wall Street analysts alike, with numbers from the Bureau of Labor Statistics showing nonfarm payroll growth exploding to 303,000 new jobs created during the month of February – more than 50% above the 200,000 predicted – while the unemployment rate fell slightly to 3.8%. These surprisingly robust top-line numbers were further amplified by the addition of 22,000 jobs to the totals reported for the previous two months combined.

        Jeffrey Hart headshot

        Jeffrey Hart, senior lecturer of finance

        That’s great news for the future of the U.S. economy, right? Unprecedented new job growth and a continued reduction in the number of people out of work.

        “Not so fast,” says Jeffrey Hart, senior lecturer in the Department of Finance at Auburn University’s Harbert College of Business. According to Hart, a peek just below the headline numbers touted in newspapers, online and on TV reveal a troubling pattern of fundamental economic weakness, not strength.

        Harbert College interviewed Hart to find out why he says the current health of the U.S. economy isn’t what it’s all cracked up to be.


        Let’s start with the basics – what does the Bureau of Labor Statistics measure each month and how is that data collected?

        Jeff Hart:

        The Bureau publishes a wealth of detailed economic performance data contained in a monthly report released on the first Friday of each month, but it isn’t clear to me that most pundits read beyond the big two – Nonfarm Payrolls and the Unemployment Rate. These numbers come from two entirely different types of surveys that pose inexplicably simple questions – the answers to which, in my opinion, can mask what’s really going on.

        • The Establishment Survey, or Nonfarm Payrolls number, is based on reports from a collection of 120,000 to 130,000 businesses, government agencies and other establishments that measure the change in the number of people employed during the previous month – either part-time or full-time positions – excluding the farming industry.
        • The Household Survey, or Unemployment Rate, the “U-3,” is drawn from a voluntary phone survey of roughly 60,000 households that simply asks whether the person answering the phone is currently employed or not. That’s it. If that person has multiple part-time jobs because they can’t find a full-time job, they count as employed.

        Yes, the headline numbers unto themselves this month looked great, which is why we saw an upside reaction by the bond market, as rates went up quite a bit across the entire treasury yield curve. That’s what we’d typically expect when economic news comes out that is perceived as good.

        But perception isn’t always reality, certainly not in this case. I’d call these results “deceptively good.”


        Why is that? What are the “experts” missing?


        We live in a headline-driven world. That’s what financial markets trade off of. Very few people look inside the headline numbers to get a more accurate picture of the economy, but the data is out there and readily accessible.

        Take unemployment data, for instance. Every month we also get what’s called the “U-6,” which measures the percentage of the U.S. labor force that is unemployed plus those who are underemployed, marginally attached to the workforce, or have given up looking for work altogether. The U-6 rate is considered by many economists to be the most revealing measure of the true state of the nation's employment situation, but we rarely hear that number reported.

        We should also note that the more widely reported U-3 number only looks at the percentage of the civilian, non-institutional population that is currently employed or has looked for a job in the last month. Furthermore, if you have been unemployed and haven’t looked for a job in the last year, the Bureau doesn’t consider you unemployed anymore – even though you actually are.


        What else seems off-kilter when it comes what is actually cited in the report vs. what is covered in the media?


        I’d point out three more anomalies here.

        1. When we look closer at the numbers, we find that the increase in the Participation Rate, another critical factor, was due to an increase in part-time employment, not full-time. In fact, full-time employment in February actually went down. That’s not a sign of a sustainably strong economy.
        2. In the Nonfarm Payroll jobs numbers, government jobs made up about 23% of the 303,000 jobs created, which is significantly greater than the average 15% increase in government jobs we typically see. A healthy economy would have a bigger percentage of private sector jobs created, especially with an almost $2 trillion deficit and a national debt of almost $35 trillion
        3. Finally, the number of manufacturing jobs created came in at a shocking zero! In fact, the February Nonfarm Payrolls Manufacturing numbers were revised downward. Again, not a sign of what would be considered good jobs numbers.

        Bottom line? We still have a lot of work to do before we can declare this a truly strong economy. To add further fuel to the fire, the recent Consumer Price Index report came in hotter than expected as well, a sign that inflation remains stubbornly high. The thought of a series of interest rate cuts any time soon seems to be diminishing, despite broad expectations of three or four cuts this year just a few months ago.

        Jeffrey Hart is a senior lecturer of finance in the Harbert College of Business focusing on investments, fixed income securities, derivatives trading and hedge funds. Prior to coming to Auburn, he held faculty positions at the University of Iowa, the University of Notre Dame, Southern Methodist University and Washington & Lee University. Before entering academia, he was a financial analyst in Chicago and Seattle. He is a partner at Palos Harbor Fund LP, a precious metals hedge fund out of the United States, Canada and Switzerland.

        The Expert Answers Q&As and columns reflect the expertise and opinions of individual faculty members and do not necessarily represent an official policy or position of the university.