Mr. Steven Kopits asserted that the Philadelphia Fed’s early preliminary benchmark supported a recession in 2022H1, to wit:
You, Menzie, held the Est Survey was more likely right. You wrote: So: (1) I put more weight on the establishment series, and (2) the gap between the two series is more likely due to increasing, and biased, measurement error in the household series, rather than, for instance, primarily increases in multiple-job holders. https://econbrowser.com/archives/2022/12/the-household-establishment-job-creation-conundrum
Dead wrong, as it turned. And predictably so.
You were wrong because you did not consider the statistics more holistically. That’s the learning point for your students. Cross check your indicators if you have dials which are telling you different things. If jobs are increasingly rapidly, then GDP should also be up. If jobs are increasing rapidly, then mobility and gasoline consumption should also be up, because so many people need to drive to work in this country. Finally, if productivity is imploding when jobs are up, you really need to take a pause and put together some sort of narrative as to why that might be happening. It suggests something anomalous in the data which requires closer inspection.
Had you done that, Menzie, you might have concluded as did the Philly Fed…
What remains of that hypothesis? Well, on March 16th, the Philly Fed released this update.
Source: Philadelphia Fed.
From the report:
Over the full year ending with this 2022 Q3 vintage — which includes additional QCEW data changes affecting the prior three quarters — payroll jobs in the 50 states and the District of Columbia grew 4.1 percent.
• Based on the prebenchmark CES sum of states and the U.S. CES, payroll jobs grew 4.0 percent.
• The revised CES sum-of-states growth rate is 4.2 percent.
This EB estimate corresponds to 6,072,000 net new jobs added during the period rather than the 5,825,500 jobs estimated by the sum of states; the U.S. CES estimated net growth of 5,904,000 jobs for the period.
For 2022 Q3, payroll jobs in the 50 states and the District of Columbia rose 6.0 percent, after adjusting for QCEW data.
• Based on the prebenchmark CES sum of states and the U.S. CES, payroll jobs grew 3.4 percent and 3.5 percent, respectively.
• The revised CES sum-of-states growth rate is 3.9 percent.
• This EB estimate corresponds to 2,203,200 net new jobs added during the period rather than the 1,322,100 jobs estimated by the sum of states; the U.S. CES estimated net growth of 1,270,000 jobs for the period. [bold italics added – MDC]
I argued in my previous rebuattal of the Kopits 2022H1 labor market recession hypothesis that these estimates were likely to be revised. And indeed they have been, so much so that (1) the previously estimated downturn is essentially erased, and (2) employment growth continues through 2022Q3.
I think it ill-advised to rely upon just one series, and so in Figure 1, I present in the CES, CPS, and ADP estimates of either NFP or private NFP, or QCEW tabulation of covered employment.
Figure 1: Cumulative percent change in CES nonfarm payroll employment (bold black), CPS civilian employment adjusted to NFP concept (tan), CES private nonfarm payroll employment (red), ADP private nonfarm payroll employment (light blue), Quarterly Census of Employment and Wages (QCEW) total employment, seasonally adjusted using log X-13 (light green), and QCEW total employment, not seasonally adjusted (dark green), all since 2021M09. Light blue shading denotes a recession hypothesized by Steven Kopits. Source: BLS, ADP via FRED, and author’s calculations.
All the foregoing suggests to me no recession in 2022H1 (although the data will be revised further). However, momentum in 2022 is no guarantee of no recession in 2023, as discussed here.