BLS Overstates October Employment – Badly Misses Economic Growth Pop in August and September


BLS Revises August Estimate Up 100%, to 192,000, Nearly Identical  to TrimTabs’ Original Tax Based Estimate of 185,000.

TrimTabs Says Economy Adds 140,000 Jobs in October, While BLS Reports Gain of 171,000.

TrimTabs’ Real-Time Data Says Economic Growth Slows in October, While BLS Reports Acceleration


There is a time to be humble and a time to pat ourselves on the back, and today is one of those days we get to pat ourselves on the back.


The Bureau of Labor Statistics (BLS) revised their preliminary August employment estimate up 100%, from their preliminary estimate of 96,000 new jobs, to 192,000.  The BLS’ revised estimate is nearly identical to TrimTabs original estimate of 185,000.  In addition, the BLS revised their September employment estimate up 25%, from their preliminary estimate of 114,000 new jobs, to 142,000.  The BLS’ revised estimate is closer to TrimTabs’ original September estimate of 210,000.  We expect the BLS to revise its September employment estimate up again in November.


At the time of our August and September employment releases, we received a lot negative feedback about the difference between our tax based estimate and the BLS’.  It now appears that the BLS estimates were off by a wide margin.  Worse still, the BLS missed an important period of accelerating economic growth this past summer.  The hefty BLS revisions beg the question of what the BLS missed.


Beginning in June we observed a steady increase in year-over-year growth in real-time income tax withholdings.  That growth began to accelerate in July, continued in August, peaked in September then slowed in October.  Specifically, wages and salaries rose 2.8% y-o-y in June, 3.1% y-o-y in July, 3.8% y-o-y in August,  5.1% y-o-y in September, and fell to 3.3% y-o-y in October.


We postulated that the increase in tax withholdings over the summer was due to job growth in interest rate sensitive sectors of the economy, such as construction, home sales, mortgage refinancing, and automotive.  We also warned in August and September that growth was likely temporary and would end in October due to the seasonal nature of construction and home selling activities.  Our predictions have come to pass and beginning in October, year-over-year growth in real-time income tax withholdings slowed.  As a result, our tax based employment model reported a 33% pullback in October job growth to 140,000, down from our September estimate of 210,000.


Meanwhile, the Bureau of Labor Statistics (BLS) reported an increase in job growth in September to 171,000, up 20%, or  29,000 jobs, from their revised September estimate of 142,000.


We believe the BLS systematically underreported the August and September job growth for two reasons: First, the survey is only 70% to 75% complete by the time of the first release; and second, the survey relies heavily on government sector employment and does not adequately capture job growth in small and medium sized companies.  We believe that much of the summer job growth was in low-paying temporary jobs in small and medium-sized companies that fly below the BLS Establishment Survey radar screen.   Similarly, we believe the BLS is now overestimating October job growth for the reasons stated above.  In addition, the BLS is now entering their six-month window of large seasonal adjustments which increase the likelihood of errors from this source.


Source: Bureau of Labor Statistics –


It appears that economic growth slowed in October.  The summer bounce we observed in economic activity ended in September.  We believe the current slowdown is due to uncertainty surrounding the massive new taxes associated with the Affordable Care Act, the winding down of federal stimulus programs, and likely cuts in military spending beginning January 1, 2013.  We estimate the Affordable Care Act will impose an estimated $260 billion in new taxes.  In addition, unless there is a budget agreement before the end of the year, the military will face an automatic $50 to $60 billion budget cut which will likely mean the loss of several hundred thousand jobs.  We expect the massive tax increases scheduled to hit consumers on January 1 and uncertainty about budget cuts to have a negative impact on economic growth.


For a complete analysis of the current employment situation and economic conditions, refer to TrimTabs Weekly Macro Analysis published this coming Tuesday, November 6, 2012.






Madeline Schnapp

Director, Macroeconomic Research

TrimTabs Investment Research

+1 (707) 829-8811


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