Brian Albrecht on the Jobs Data
ICLE Chief Economist Brian Albrecht was quoted by Fortune in a story about recent revisions to the U.S. Bureau of Labor Statistics’ jobs report. You can read the full piece here.
Brian Albrecht, chief economist at the International Center for Law and Economics, said he’s not surprised by the lack of market movement. “It’s a big revision, but we expected a big revision,” he told Fortune. “Private forecasters were putting out numbers—anything from 350,000 up to a million—and this is on the upper side of it, but we expected it to be on the high side, which is why we had a bunch of coverage on it before it even came out.”
To Albrecht’s point, investors widely anticipated a large negative revision to payroll growth on Wednesday, with some fearing an even more dramatic 1 million reduction in jobs between March 2023 and March 2024, as Fortune previously reported.
Eric Wallerstein, chief markets strategist at Yardeni Research, echoed Albrecht’s somewhat sanguine view as well. “The market’s lack of reaction is pretty telling,” he said. “I think the revisions, you can say, they were priced in. We were kind of expecting some sort of big revision … It’s kind of a nothing burger.”
…Albrecht backed up that view. “The [Fed] governors know this stuff, and the voting members know this stuff,” he said. “So it shouldn’t change too much.”
…Albrecht explained that there are always common errors that can occur when the Bureau of Labor Statistics (BLS) reaches out to businesses for employment data. “They don’t get every establishment, and so they get some sampling error,” he said, noting that “sometimes they get HR folks who do a really good job; sometimes they don’t. Sometimes they send [the payroll survey] back; sometimes they don’t.”
..,“The model overestimated based on a big jump in new business formation from the year before,” Albrecht explained. “It turns out that that was overly optimistic. Business formation still is up, but it skyrocketed and then flattened out.”
The good news, according to Albrecht, is that this sampling issue may soon be a thing of the past, because we have settled into a more “steady state” of business births and deaths.
“This revision was huge, yes, but we shouldn’t expect some big change next year in the revision, because the big reason for the revision—the kind of mess-up of the birth-death model—shouldn’t be there anymore,” he said.