THE DEEPER DIVE: The Labor Market Has Blown out BIGLY!
No sooner did the president fire a Biden-era department head for negative job reports than the new guy he hired to replace her reported far worse!
You know it is bad when you cannot even get positive labor reports after you fired the last person in charge for having the audacity to put out a bad report. Trump claimed the former head of the Bureau of Labor Statistics was trying to make him look bad when she put out her first truly weak labor report in many months. He fired her for it, but now the guy he put in her place issued an even worse labor report over a longer period of months by revising her most recent months downward (after she had already revised some of them downward).
Not the result Team Trump had been expecting and promising:
Commerce Secretary Howard Lutnick told CNBC’s “Squawk Box” that BLS jobs reports will be more accurate with McEntarfer gone, because “you’ll take out the people who are just trying to create noise against the president.” (CNBC)
Well, so much for that load of verbal vomit, which Lutnik spewed all over the poor government apparatchik at the BLS a few weeks ago! The new reports may be more accurate, but they are also a lot more noisy!
You may remember my writing in a Deeper Dive back on August 10th that the job market was falling because of DOGE cuts and tariffs and that Trump was actually firing the head of the Bureau of Lying Statistics for exactly the wrong reason:
… labor has finally begun to contract, causing Trump to fire the head of the BLS who dared report that inconvenient “truth….”
Here is how tariffs are impacting the large services sector to suppress businesses into a recession, continuing to bring about one of my most important predictions at the start of the year, which the mainstream media was certainly not predicting back then:…
Both the rising costs service companies are seeing in their own supplies and materials for construction, etc., and the chaos of tariffs going on and off and on and off, are peeling down business activity a layer at a time….
Now, don’t get me wrong here about firing the director of the BLS: I’ve said for years that GDP and the Bureau of Labor Statistics labor reports are both cooked books. So, I have no problem with firing the lousy statisticians, EXCEPT the reason for firing them is bassackwards. They tend to report things in terms that glow more than merited….
Labor has most frequently been reported high in one quarter then typically gets revised down in the next…. What Trump should have done (based on someone doing what he wants to see) was give his labor chief a bonus for cooking the books so nicely for him in the previous two months that just got their normal downward revisions after those numbers were placed on the back burner to simmer down where they get less attention. In fact, reducing those months moments before giving the new report, helps the new month-on-month figure look much better, bad as it was.
While Erika McEntarfer, the director of the Bureau of Labor Statistics, did a fine job for Trump in reporting good numbers during May and June (which I found highly suspicious so paid little attention to them), she apparently was not able to find enough rose-colored ink to stretch the truth any further in her latest report. So, her downfall was in reporting a decline in the headline number as well as in those back numbers.
And now everyone can see the truth in all of that because the new loyalist that Trump appointed just reported even worse numbers. You can be certain, since Trump said the negative numbers were intended by the previous person to smear him, that the president did all he could to vet the new person for loyalty and willingness to report better numbers and live up to Lutnik’s promise.
Apparently, Trump had the misfortune of accidentally hiring a man who put honesty above loyalty because Friday’s report underlined McEntarfer’s report to such an extent that the only thing Trump could say about the bad numbers today was that they are only because the good numbers will be coming in next year. He moved the goal posts because it is hard to justify firing someone every time you get reports that look bad because then it looks like your just rigging the numbers by threatening people for telling the truth, which, of course, is exactly what he was trying to do.
As I went on to say …
The problem I see is that her decline [in job numbers] was likely not large enough! Even after the Bureau of Lying Statistics puts out its regular deeply flawed numbers, and after they revise those numbers down in following months, they STILL often have had to make an even more MASSIVE downward revision of half-a-million-to-nearly-a-million jobs once a year to reconcile their hiring/firing seasonally-adjusted (i.e., politically manipulated) statistics to match known actual employment. So, even their early revised numbers are nearly always overstated. Moreover, their data sampling has become much thinner over recent post-Covid years and thinner still under DOGE as they have fewer people to collect the data.
The bottom line is that these guys know how to keep their jobs by making the incumbent government look as good as they can. They’ve been deeply embedded in government through enough administrations to be quite artful at it, but there are credibility limits to their truth-stretching mathemagic. So, when the bureau chief finally can’t stretch the truth hard enough without snapping it in order to avoid dishing out clearly recessionary hiring numbers, then you know we are IN a recession. She had to be fired because she failed at the department’s traditional prime directive of making the government look as reasonably good as it can. There are plenty of others who want the job.
So, if you thought I was just being too hard on Trump back then, look at how it all turned out. I’m just giving the truth some people don’t want to hear, regardless of what it costs me. I try to say it before others get bold enough in order to give you what I like to call “the news before it happens.” And the truth turned out as bad, if not worse, than I said we’d soon find out. (And that is how the rest of this year is going to keep revealing itself.)
Recession, or course, was my main prediction for the year. I’ll come back to that; but, first, I want to look at just how bad this latest jobs report really was.
How bad was it?
The worst news was the revision for June, which takes us back to when the head of BLS was the woman whose latest reports were said to so overly negative and, hence, fake that Trump fired her for trying to sabotage him.
A data revision showed the economy lost 13,000 jobs in June — the first month of job losses since December 2020. That loss ends the consecutive-job-growth streak that had lasted 53 months, from January 2021 through May 2025, according to Daniel Zhao, chief economist at Glassdoor, a career site…. (CNBC)
Apparently, McEntarfer had actually been way too kind to Trump and, in usual BLS style, had overestimate jobs. (I told you Trump should have given her a bonus if glowing reports were what he wanted, given that she was being as glowing as she could be and more glowing than the truth would bear.) With his new guy in place, the BLS revised her optimistic numbers down to reality as better data came in and wound up with our first actual net loss of jobs in nearly half a decade!
In fact, by a slightly longer yardstick for the time being measured, this is the worst eight months in three times that long, except for the pandemic global lockdown!
Outside of the pandemic, the U.S. economy hasn’t added this few jobs in the first eight months of a year since 2010, around the Great Recession, wrote Laura Ullrich, director of economic research for North America at Indeed.
“August’s Employment Report confirmed that the labour market has headed off a cliff-edge,” Bradley Saunders, a North America economist at Capital Economics, wrote in a note Friday….
“Think of the worst game of musical chairs you ever played, where there are 12 chairs and they’ve let 100 people go after those 12 chairs,” [Mandi Woodruff-Santos, a career coach] said. “That’s kind of how it feels these days.”
As for the current part of the report for August, even Zero Hedge’s headline (as a totally pro-Trump publication because they know whom they need to pander to) read as follows: “Job Growth Collapses to Just 22K, Unemp Rate Rises to 4.3% Putting 50bps Rate Cut in Play.”
Yes, this was the kind of labor report Powell needed if he was going to follow through with that rate cut he indicated would be coming in September in spite of his reiterated concerns about rising inflation. In fact, ZH sees this report as the basis for the same kind of extra-large size rate cut the Fed started off its last cutting cycle with a year ago when they claimed it was trying to prop up Biden in an election year.
Ahead of today's jobs report, consensus was that a print between 40K and 100K is largely priced in and greenlighting a 25bps rate cut by the Fed in two weeks, and that we would need a real outlier number for the Fed to either cut 50bps... or not hike. Well, we got a real outlier when moments ago the BLS reported that in August the US added only 22K jobs, a big drop from the upward revised 79K (from 73K previously) but more importantly June was revised from 27K to -13K, ushering in the first negative jobs print since 2020.
With these revisions, employment in June and July combined is 21,000 lower than previously reported, continuing to trend of negative revisions into a labor market slowdown….
Just as importantly, the payrolls number came in far below Wall Street estimates of a 75K print….
Yet, right in line with what I said about the earlier numbers still being too optimistic.
The unemployment rate also rose to 4.3% (4.324% to be precise) from 4.2%, in line with expectations….
But to get to the ugliest component of today's jobs report one had to dig deeper, only then one would find that the number of full-time jobs tumbled by 357K, the second consecutive month of sharp full-time job losses... while part-time jobs surged by 597K, the biggest increase since February.
Sounds like people are falling out of full-time jobs to land whatever they can get to fill the gap. These numbers will get worse because many of the DOGE firings were given protracted timelines to where they would go off payroll in the fall.
Last but not least, the number of multiple jobholders [people who have to piece together more than one job to make things work] unexpectedly soared by over 443K to 8.785 million. This was the biggest monthly increase since Covid, and clearly yet another indication of just how bad the jobs report is.
Recession proof
That is written as two words, not one hyphenated term; i.e, we are not recession-proof; we are at a point now of having new proof that we are in a recession.
Getting back to my main prediction at the start of the year, which was that we would fall into recession, we now have a graph that really looks like recession is now. When we saw a decline in GDP reported for the first quarter of the year, most financial writers said the receding national production couldn’t be the start of a recession because the labor market was strong. We heard over and over that we never go into recession until unemployment starts to rise.
The claim that the first quarter was not the start of a recession because the labor market was holding strong started to fall apart when the former head of the BLS started revising the numbers sharply downward, going backward three months from the latest month reported (two months from her final report). And the idea that GDP moved out of a recession in the second quarter is undercut as a measure for the true health of the economy when it was easy to forecast that it would rise simply due to all the tariff front-running. Therefore, the numbers have been erratic, but this latest report makes it solidly clear which way the economy is heading. It’s shrinking.
You can see from this graph by Wolf Richter, which is the kind I have pointed out in times past, that, once labor puts in the kind of turn that we’ve seen, it is not only normal for it to leap straight up, but it is normal for it to make the huge leap INSIDE of a recession.
No president wants to be one who presided over our plunge into a recession. So, of course, a labor statistic department head showing a big downturn in jobs had to go because jobs are the surest sign of a recession.
I’ve been saying jobs would put in their turn quickly and that statistics were getting wobbly and slower to come in due to all the government staffing reductions, and I also let you know that there would be a high likelihood of a massive downward revision to reconcile those wobbly numbers with reality, which would swing the picture dramatically.
Today, we have an article by Bill Bonner putting that revision on our event horizon:
A report out yesterday told us that the feds are about to announce a big revision in the unemployment numbers – in which almost a million jobs will disappear.
And then, the Fed, whose job is to make sure we have full employment, will have to lower interest rates…and ‘print’ more money.
Next stop. Stagflation.
If that is what happens, I believe that will amount to the biggest annual time revision ever. We’ve had others that came close, and they are another reason I have always said the BLS monthly numbers are routinely over-optimistic so that the head of the BLS should have been fired for always being overly positive in order to make the administration she served look good, not for finally giving out numbers that were closer to what the real truth was all along.
Once again, you are likely about to find out that the real job numbers this year have been much worse than statistics show, even after the latest revisions for the reasons I’ve been giving along the way about not trusting them too much—tariffs, front-running of tariffs, soaring inflation, and DOGE cuts leaving department’s less able to run the numbers. The news will, even yet, turn out worse than the stats initially said.
In the following sections, I’ll lay out some of my updated predictions for the remainder of this year….