Further Thoughts on the Labor Market Collapse of 2022H1 (aka the Kopits Thesis)

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, today, the Philly Fed released an update. Putting together the official nationwide nonfarm payroll series published by the BLS, the sum of states from CES and the Philadelphia Fed early benchmark, we have the following picture.

Figure 1: Nonfarm payroll employment, FRED series PAYEMS (bold black), CES sum of states (tan), sum of states early benchmark by Philadelphia Fed (red), civilian employment over age 16 adjusted to NFP concept (teal), Quarterly Census of Employment and Wages total covered employment, adjusted by Census X-13 by author (pink), all in thousands, bseasonally adjusted. Light blue shading denotes hypothesized (by Mr. Steven Kopits) 2022H1 recession.  Source:  PAYEMS from BLS via FRED, civilian employment adjusted to NFP concept from BLS, QCEW from BLS, sum of states data from Philadelphia Fed

I would suggest that the various vintages of these data confirm the following propositions: (1) the CES series is more reliable for business cycle tracking than the aggregate employment series derived from the CPS; (2) the series are all revised over time (including QCEW).

If you see a recession in 2022H1, then contact me. Earlier vintages of these series have been displayed on Econbrowser repeatedly; yet I have not yet seen Mr. Kopits admit that perhaps he might have been hasty in his assertion that labor market data indisputably signalled a recession in 2022H1.

6 thoughts on “Further Thoughts on the Labor Market Collapse of 2022H1 (aka the Kopits Thesis)

  1. pgl

    “Dead wrong, as it turned. And predictably so. You were wrong because you did not consider the statistics more holistically.”

    Don’t you love how Stevie uses bombast and BIG words he does not even remotely understand as a substitute for actual thinking. No Stevie shoots a lot as he is incapable of adult behavior.

  2. Moses Herzog

    Kopits must be on donald trump’s campaign plane right now. Every luxury flight should have a bathroom attendant.

  3. pgl

    A different topic but we do know little Stevie kept telling us that our sanctions against Russian oil exports were ineffective. So I decided to check on the latest pricing:


    Russian Urals crude oil futures traded around $57 per barrel, supported by strong demand, with shipments to both China and India hitting a record high in May. Also, additional support came from Saudi Arabia, the world’s leading oil exporter, which pledged to cut production by an additional 1 million barrels per day (bpd) from July. Still, the price of Russia’s flagship Urals crude oil blend is below the price cap of $60 per barrel imposed in December by the European Union, Group of Seven countries, and Australia in order to curb Russia’s ability to finance the conflict in Ukraine.

    Brent oil is selling for almost $72 a barrel so this $57 a barrel strikes me as quite the discount.

  4. Ivan

    Why is it that Larry Summers is wrong a lot more often than he is right?


    I think you can gain some insights into the difference between him and Krugman. When Krugman gets something wrong he admits it and try to figure out where his presumptions and analysis went off the track. Summers never admits he was wrong but tries to come up with explanations as to why he actually was right (or reality is wrong). You cannot get better unless you learn from your mistakes and you cannot learn from your mistakes unless you admit them.

  5. Jacques

    Larry Summers won’t be satisfied until American workers become slaves, working for nothing more than bread and water, if that.

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