Mark Zandi, the chief economist of Moody’s Analytics has cautioned that the June employment report paints an overly optimistic picture of the US labour market. According to a report by Benzinga, in a series of posts shared on social media platform X (formerly known as Twitter) Zandi argued that commentary around the report was “much too dismissive of how weak the numbers looked, all the noise in the data notwithstanding.” Zandi noted that payroll employment posted only modest gain in June, while in the months prior to June, job gains were revised downward. He further added that most of the hiring came from the healthcare sector rather than being broadly distributed across the economy.“Not only did employment as measured by the payroll survey post a small gain in the month, but previous month’s gains were revised much lower, and the bulk of the job gains were in healthcare. And employment as measured by the household survey fell sharply again, as it has all year,” wrote Zandi.
Household survey weakness
The economist further pointed to the household survey, saying employment “fell sharply again, as it has all year.” He argued that the decline in the rate of unemployment was misleading because it coincided with a sharp drop in labour force participation. Participation has fallen across most demographic groups, particularly among workers under 35. “The unemployment rate ticked lower, but only because labor force participation is in free-fall. Participation is down across most demographic groups, especially among workers under 35. Employment-to-population ratio for prime-age workers also fell. The declines are surely overstated, but even so,” added Zandi.
Adjusted unemployment measure
Zandi cited his “vicious-cycle measure,” which adjusts unemployment for trend labor force participation. He said the measure rose above 5% in June: “Without the outsize decline in participation, unemployment would be over 5%.”“You may recall our vicious-cycle measure, which adjusts the unemployment rate for trend labor force participation. It rose to over 5% in June. That is, without the outsize decline in participation, unemployment would be over 5%. As I said, the commentary on the June report was much too sanguine,” wrote Zandi in a post on X.
Other economists weigh in
Some economists echoed concerns about the June data. Laura Ullrich of Indeed Hiring Lab suggested the decline in participation may reflect a shrinking worker supply rather than weaker hiring demand, noting employers could still be seeking workers but facing fewer available candidates.Meanwhile, Cathie Wood of ARK Invest called the report “weird”, arguing government labor statistics appeared distorted due to differences between payroll and household surveys. She advocated using more private-sector data to assess labor market conditions.
