The pandemic is messing with US labour market data

This is an audio transcript of the FT News Briefing podcast episode: The pandemic is messing with US labour market data

Marc Filippino
Good morning from the Financial Times. Today is Tuesday, January 4th, and this is your FT News Briefing.

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The jury has reached a verdict in the Elizabeth Holmes trial. Apple’s market capitalisation has reached a new milestone, and Joe Biden is trying to make American meat cheaper. Plus, don’t get too excited about the December jobs report that’s due out on Friday. It may change by a lot.

Colby Smith
In a pandemic, it’s been quite difficult to get a clear reading on the state of the economy and the health of the labour market in particular, just because things are changing so quickly.

Marc Filippino
We’ll talk about why the US has been struggling to measure jobs growth. I’m Marc Filippino and here’s the news you need to start your day.

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Jurors yesterday found Elizabeth Holmes guilty of conspiring to defraud investors. Holmes is the founder and former head of the failed blood testing start-up Theranos. The company was worth about $9bn at its peak, but it was dissolved in 2018 after having faced investigations by regulators. The California jury also convicted Holmes on three counts of wire fraud and conspiracy to commit wire fraud. They found her not guilty on four other counts. Holmes pleaded not guilty to the charges. Each charge carries up to 20 years in prison. Holmes can appeal against the verdict in state appeals court.

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Apple has become the first company ever to hit a $3tn market cap, making it worth three Tesla’s, seven Home Depots and 11 Netflix’s. But the really shocking thing is the pace of growth. It took Apple just a year and a half to add its most recent trillion. The FT’s Patrick McGee has more about Apple’s hold on consumers.

Patrick McGee
The way I like to think about it is 1.65bn people in the world essentially view the internet through the lens of Apple, which is to say they use the iPhone, the iPad or a Mac of some kind. And that alone is pretty extraordinary. I’ve read a number of different articles and there’s really nobody that’s saying, hey, three trillion dollars, we’re in bubble territory, right? Like, we’re not in bubble territory, right? Like most Apple analysts remain bullish. And you know, there’s just every reason to think that this company is properly valued in the multi trillions, which is sort of an insane sentence, just as I say it.

Marc Filippino
Patrick McGee covers Apple for the Financial Times.

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The Biden administration announced plans yesterday to tackle the rising price of meat. Meat, like a lot of goods, has fallen victim to inflation, and the administration hopes a new series of reforms will reduce the cost. But the FT’s Washington bureau chief James Politi says there’s another reason why they’ve honed in on this industry.

James Politi
They’ve seen that high levels of market concentration in the meat industry in which a small group of players are sort of dominating the sector. And they hope that by promoting, you know, the production and processing of meat by smaller producers, they might be able to bring costs down.

Marc Filippino
Now, James, the administration is trying to make it easier for smaller producers to compete by giving them grants and making it easier for them to access credit. Is the Biden administration doing anything else?

James Politi
So some of the incentives are tightening the rules of origin for meat so that it’s not quite as easy for the largest meat producers to slap “Made in America” labels on their meat if they contain some products, sort of input products, that are coming from around the world. And they hope that this will also help the small- and medium-sized meat producers, though of course, some of America’s trading partners will not be happy with that.

Marc Filippino
So is this actually going to move the needle when it comes to high meat prices?

James Politi
Well, I think the price of meat is something that’s actually quite politically sensitive. Maybe not quite as much as gas, but it’s high up there. And interestingly, you know, they believe that through executive action, they can change the dynamic in certain respects. Interestingly, on the meat sector, they’ve also set up a new joint initiative between the Justice Department and the Agriculture Department to try to more effectively police competition law violations and crack down on price gouging, something that they’ve been trying to do with Big Oil as well. So they’re sort of applying some of the same playbook that they did with gas to meat.

Marc Filippino
James Politi is the FT’s Washington bureau chief.

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The US is releasing its December jobs report on Friday, but we might want to take it with a grain of salt. That’s because the bureau that releases those numbers is struggling to accurately measure jobs growth. The Bureau of Labor Statistics monthly jobs report is being distorted by the pandemic, and it’s caused the agency to adjust its initial estimates of payroll growth by nearly a million jobs last year. That’s the highest adjustment ever. To find out why this is happening, I have the FT’s US economics editor Colby Smith on the line. Hey, Colby.

Colby Smith
Hi, Marc.

Marc Filippino
So Colby, why is the US struggling to measure jobs growth? Is it just the pandemic?

Colby Smith
Well, there’s a couple of factors at play at the moment here. The first has to do with data reporting and some lags in businesses actually responding to the surveys that the BLS puts out in order to put together its estimate for jobs growth. So what’s happening is that some of the businesses that typically respond to the monthly establishment survey from which the headline jobs figure is calculated, those businesses are not responding to the survey in time. That means that the BLS has to bake in more assumptions than it typically does for each subsequent estimate. And so what ends up happening is that the revisions end up giving us a more clear reflection on the actual state of the jobs data because as we get the subsequent revisions, we get more data from the various businesses now that they have a bit more time to respond.

Marc Filippino
And Colby, what’s the second reason?

Colby Smith
Second reason has to do with seasonal adjustments. So the BLS and its economists, they make certain assumptions about various seasonal patterns, whether it’s hiring related to the holiday season, back to school, changes in unemployment as well. But again, this all goes back to the fact that the pandemic has really changed the way that we behave, the way that consumers are spending money, the way that stores are operating. So a lot of the seasonal patterns that the BLS has become quite accustomed to, those changed quite dramatically, and that’s just made it quite difficult to get the number exactly right on the first go.

Marc Filippino
So if they’re eventually revising the data and getting it right, why does it matter that they’re getting it wrong on the first try?

Colby Smith
Well, policymakers take quite a lot of attention to this data, so you’re right that the revisions end up better reflecting what the actual jobs growth is. But I think that the narrative really does begin to crystallise when those first estimates do come out. So back in September and October, when jobs growth was much weaker than expected, a lot of the questions that the Federal Reserve was receiving was what were they gonna do if jobs growth was slowing down or not bouncing back, let’s say, as quickly as many people anticipated. So I think in a lot of ways, ultimately, yes, the numbers do sort themselves out. But policymakers are so sensitive to these numbers, it does make it a little bit more difficult, let’s say, to, you know, know for sure that the policy is at its most appropriate settings.

Marc Filippino
So is there anything that the Bureau of Labor Statistics can do to get it right on the first try or are they trying to improve things at all?

Colby Smith
Well, I think a lot of it depends on the trajectory of the pandemic here. A lot of the economists that we spoke to for the piece mentioned that, you know, so long as we have the virus driving economic activity, it’s gonna continue to be quite difficult for the BLS to gauge job growth appropriately on the first round. If the pandemic does still end up constraining economic activity, spending is holding people back from returning to the workforce, all of those things are gonna make it all the more difficult for the BLS to estimate any numbers here. But if we go in the opposite direction and the pandemic is fading from view, then I think that the numbers will start to look a bit more aligned.

Marc Filippino
Colby Smith is the FT’s US economics editor. Thank you, Colby.

Colby Smith
Thank you.

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Marc Filippino
And before we go, Mercedes has unveiled an electric car that it says can travel a little more than 600 miles on a single charge. That’s three times higher than the industry average. It’s not the first car to hit this milestone. China’s Guangzhou Automobile Group said back in November that it has a car that can pretty much do the same thing. Now, this flex by Mercedes is based on digital simulations the company ran, but it hopes to show off a roadworthy version of the car this spring.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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