Englander/Hewin (gated) from Standard Charter:
Q3-2022 BD adjusted to add 294,000 nonfarm payrolls. That seems a bit high to us, because apart from during the initial recovery from COVID in 2020, the QCEW did not show that net job growth in Q3 was reduced from open to closed. In addition, the total private sector job gain in Q3 2022 is 232,000 NSA, so the BD adjustment accounts for more than 100% of the private sector nonfarm payroll gain. We note that for the whole of H2-2022, the BD adjustment accounts for 47% of private sector NFP employment growth. That would be an unusually high share, according to QCEW data. We cannot rule out that the H2 NFP data is correct, but we think it is – likely – a bit exaggerated. This means that when the baseline revision is implemented in early 2024, there will be a nice downward revision to the baseline revision to employment levels.
As noted by other observers (including those at the Philadelphia Fed) and those who place a heavy emphasis on household surveys, there appears to be evidence that the CES estimates of NFP are wrong. However, it is not clear that all alternative estimates point to a slowdown in the second quarter.
figure 1: Private nonfarm payrolls CES release from January 2023, including baseline revisions (blue), ADP (sky blue), QCEW private covered workers, seasonalized using log-transformed Census X-13 (pink) Adjusted, Philadelphia Fed Preliminary Baseline minus Reported Government Employment (tan squares), all in 000, sa. Sources: BLS (various) and ADP via FRED, BLS QCEW, Philadelphia Fed via FRED, and authors’ calculations.
While the QCEW series through September and preliminary Philadelphia Fed benchmarks both point to a slowdown in the second quarter, the ADP (which relies on a completely different data set than surveys) does not show a slowdown. Because the QCEW is a census, not a survey, it generally has higher precision; however, it is revised as new data become available. So we’ll see on February 22nd.
