Those Pesky Payroll Numbers

Well, I got that one wrong. I thought the U.S. March employment report released today (April 1) might show a spike down on the basis of a recent uptick in Q1 layoffs and initial jobless claims. It was not to be. The Bureau of Labor Statistics (BLS) reported 215,000 jobs added in the month, right around the consensus estimate. Good thing I didn’t place any bets on my theory.

But there were some odd machinations going on under the hood. The March employment report showed some astounding job growth in the retail industry…an estimated 47.7k employees added (seasonally adjusted) after absolutely surging by more than 65k in each of the two prior months.

In the six months since September, while retail sales have tumbled well below the 3% growth where a healthy retail sector begins, the BLS estimates that retail employment is up an enormous 261k jobs. That’s 43.5k per month, just about three times the growth rate for the period from August 2003 through August 2005 (15.8k per month) when retail sales were growing by an average of 6%. How is this possible?

The U.S. Commerce Department’s retail sales estimates remain below 3% (on a 6-month average basis) which is the traditional dividing line between retail employment expansion and contraction. Other estimates of the retail climate agree: Sales are soft and getting softer. We should be seeing layoffs, not aggressive hiring. Note this chart from Alhambra Partners

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This data requires us to conclude that retail executives have completely lost their minds.

This is just one of the many divergences between the BLS monthly job reports and other data on household incomes, hours worked and GDP growth. The numbers just don’t add up. The headlines from the BLS reports continue to preach perfection on the surface, but with enormous and growing discrepancies (like the retail industry) underneath. The BLS estimates that, since September 2015, the labor force has grown by 2.4 million despite a serious manufacturing recession, the worst financial turmoil since 2008 and enormous uncertainties about the global economy. I don’t think so.