The Fed, after complaining about missing immigrants in labor market data, now has further support for its pivot to wait-and-see.
By Wolf Richter for WOLF STREET.
We’ve been discussing this issue – and its impact on employment data – since April after the Congressional Budget Office came out with estimates of actual population growth that included the huge wave of recent immigrants that wasn’t included in the Census Bureau’s population data, and thereby wasn’t included in the employment data by the Bureau of Labor Statistics, which extrapolates its household survey data to the population estimates from the Census Bureau.
Because many of the newly arrived immigrants, legal or illegal, are either working or looking for work, employment and labor force data were understated because they didn’t reflect those immigrants.
In December, the Census Bureau released its annual revisions that finally included this population growth of 8 million people over the past three years. So we knew that the annual adjustments by the BLS to its household survey data of employment and the labor force would produce a massive spike in January.
The BLS sticks the entire population adjustments to the household survey data into January, which created a spike of employment (+2.23 million in January from December) and a spike of the labor force (+2.20 million in January from December) that correct for several years of understatement. The BLS doesn’t revise backwards its household survey data with that population data. These adjustments, up and down, lumped into one month, happen every year, but this year they’re huge.
Total employment spiked by 2.23 million in January from December, to 163.9 million, reflecting the adjustment in the household survey data for the massive wave of immigrants, legal and illegal, over the past years.
The household survey includes workers who are excluded from nonfarm payrolls reported by establishments, such as self-employed workers whose businesses are not incorporated, farm workers, and private household workers. So, total employment as depicted by the household survey is typically 6-8 million workers higher than nonfarm payrolls.
Because of the understatement of total employment in the household survey data over the past few years, that difference between total employment and nonfarm employment shrank to just 2.7 million workers in December.
Today, the huge upward adjustment to total employment and the previously announced downward revisions of nonfarm employment (more in a moment) caused the difference to increase to 4.83 million.
This chart shows that disconnect over the past two years between total employment (red) and nonfarm employment (as revised, blue), and how it reverted to pre-pandemic trend in January:
This is how the spread between total employment in the household survey and nonfarm payrolls from the establishment survey shrank from 6-7 million before the pandemic to 2.7 million in December, and how it reverted to pre-pandemic trend in January (blue line):
The Labor Force spiked by 2.20 million people in January from December, to 170.7 million people, reflecting the adjustment for the massive wave of legal and illegal immigrants in 2021-2024 that have joined the labor force but that were not included in the Census Bureau’s population data that the BLS uses.
The labor force includes total employment plus the people who were actively looking for a job during the survey period but didn’t have a job.
Unemployment fell by 37,000 to 6.85 million people who were actively looking for a job during the survey period, the lowest since June 2024, according to the adjusted household survey data today.
The unemployment rate (U-3) declined to 4.0% In January, the lowest since May. The unemployment rate is defined as total unemployment divided by the labor force. Both, total unemployment and the labor force were adjusted for January to reflect the wave of immigration, which caused the unemployment rate to be slightly lower than it had been reported late last year.
This unemployment rate of 4.0% is historically low, as the long view shows, depicting a solid labor market, and well below the Fed’s median projection in its Summary of Economic Projections at the December meeting: For the end of 2024, the median projection dipped to 4.2%, and for the end of 2025, it dipped to 4.3%:
Nonfarm payrolls rose by 143,000 in January from December, to 159.1 million. November’s job growth was revised up by 49,000 to 261,000; and December was revised up by 51,000 to 307,000, according to the BLS today (blue in the chart below).
The three-month average job growth, including the revisions, was 237,000 per month, the highest since March 2023, and at the high end of the pre-pandemic range (red).
The three-month average also shows the Fed’s panic moment when it kept declining in 2024 and finally dropped to only 82,000 jobs created in August, which caused the Fed to cut by 50 basis points at the September meeting.
The nonfarm jobs revisions, whose preliminary estimates had been announced in August by the BLS as a lumpsum figure for the period from April 2023 through March 2024, were applied in today’s release to each month going back to the beginning of 2023. Per today’s release:
- Job creation in 2024 revised lower by 236,000 jobs to 2.00 million jobs created.
- Job creation in 2023 revised lower by 419,000 jobs to 2.59 million jobs created.
This chart shows the revised monthly nonfarm jobs (red) through January and the previously reported data through December (blue). Even the revised nonfarm jobs data depicts a solid labor market.
Average hourly earnings in January jumped by 0.48% (5.9% annualized), the biggest increase since June 2023. And the prior three months were revised higher.
This caused the three-month average to accelerate to +4.5% annualized (red):
Average hourly earnings year-over-year were also revised higher going back to mid-2024 and in January rose by 4.1%, the fourth month in a row above 4%.
The Fed complained about the lack of immigration data in the labor market figures, lamenting that it has to make policy decisions based on employment data that didn’t include the massive wave of immigrants, and having to wait for a long time before the adjustments and revisions are made.
Fed governor Michelle Bowman, in a speech a week ago, was one of the latest, exhorting government agencies to provide more accurate immigration data on a timelier basis. This is what the said:
“I hope the revision of the Bureau of Labor Statistics labor data, which will be released next week, will more accurately capture the changing dynamics of immigration and net business creation and bring more clarity on the underlying pace of job growth.
“It is crucial that U.S. official data accurately capture structural changes in labor markets in real time, such as those in recent years, so we can more confidently rely on these data for monetary and economic policymaking.
“In the meantime, given conflicting economic signals, measurement challenges, and significant data revisions, I remain cautious about taking signal from only a limited set of real-time data releases.”
With these revisions of employment and unemployment data, the Fed now has further support for its pivot to wait-and-see, with the revised unemployment rate at 4.0%, well below the Fed’s projections; with nonfarm job growth solid, particularly over the past three months (+237,000 on average); and with average hourly wages growing at a faster rate (+4.5% three-month average annualized, +4.1% year-over-year) than previously reported.
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Nice data collection as always, I always enjoy your articles.
Wolfs gift is extrapolation.
“Because many of the newly arrived immigrants, legal or illegal, are either working or looking for work, employment and labor force data were understated because they didn’t reflect those immigrants.”
Which is one of the anecdotal, descriptions of what is not going on from a macroeconomic perspective.
The US is an aging society who’s reproductive rate is insufficient to sustain the current production, let alone, the planned production without the Mexican immigrants who also tend to have many talented relatives.
If everything goes according to plan we should see about 12 million of them deported along with another six to ten million legal family members. I don’t think I would buy real estate or rental property in Texas because it’s about to crash. In Texas alone we could see six to eight million leave. Good times!
That plan only exists in the social media where it ferments all on its own.
It’s been done before….and they were even deported!…technically………..just in a different condition.
lol talented you crack me up. They have no talent or skills. You apparently don’t know nothing about the construction trade where most illegals work. They have no skills or talent. Houses today have so many mistakes in them. Builders just found ways to hide them behind stucco and drywall. Walls out of plumb, floors out of level, rooms and whole houses out of square. Window and door openings shimmed from 1/2” at that bottom to 6 inches on top. Then hidden behind drywall and stucco. Houses are now built cheaper with inferior materials and skills. That’s my opinion with over 50 years of experience in the trades.
“Good advertising can make people buy your product even if it sucks … A dollar spent on brainwashing is more cost-effective than a dollar spent on product improvement.” ~ Scott Adams
Yes materials on a whole are cheaper by design. But the comment about illegals is just nonsense. Contractors who want quality will used skilled labor. Those who want to cut corners will use low quality materials and unskilled labor because most people don’t know they are being cheated. There are many talented migrants, illegal and legal.
I don’t know that they have no skills. They make for skilled roofers, drywallers, and lvp floor layers. Windows, doors, cabinets, and trim might take a master’s touch, but everyone has their place.
Customers aggressively shopped for the lowest bid, GCs gave the customers what they wanted and lowered the bar in the process. This is the result.
I agree with you that most single family homes these days are built with inferior materials and workmanship. But paper GCs with no building experience played a role in hiring cheap dummies to build these homes.
“That’s my opinion……”
Indeed that’s all it is
You seem angry, maybe try some deep breathing?! I don’t disagree with your assessment that the skill level of many of these employees is less than ideal.
The complaint here is to the business owners who aren’t willing to pay better skilled laborers nor train and supervise current laborers.
But there is another reality here in the US, in China and all over the developed world: too many people are choosing not to have enough children to replace themselves. Infrastructure and capacity exist and some of the leadership have found ways to bring more people in to meet demand and capacity. It’s not a new idea, it was messy in the 1800s as new immigrants arrived, it was messy in the 1900s as immigrants arrived.
But if America is going to compete this century, the population-or automation- will have to kick in substantially. Most people don’t like either one of these ideas.
China has brought in tens of millions of migrants from Southeast Asia, Africa, South America, all over the world. They have very basic housing, food, clothing-essentials. They work cheaply and they allow Chinese culture and businesses to gain a foothold in new markets. We are crazy if we don’t try to compete with this.
It’s because many of us realized bringing a kid into this world was a pretty damned mean thing to do unless we were at least 1%ers.
To all people near or at poverty level, family is the ONLY thing they can invest in.
I had nothing to do with any of it…honest.
Consumer inflation expectations today are at 4.3%. Earnings just jumped 4.1%, wildly beyond expected print. Unemployment rate dropped a little to 4.0%, but has been pretty level for quite a while. Inflation is on the rise. Reciprocal tariffs will likely raise inflation, although maybe not as much as some want to think. Long-term (10, 20, 30 year) rates are rising, because the bond market does not believe the Fed has the cajones or the brains to successfully manage inflation.
The Fed might want to think about raising the fed funds rate. But they will likely remain “cautious” until inflation hits them in the head with a two-by-four.
I prefer inflation to hit them in the head with a dozen eggs instead….
That made me laugh. 😂😂😂😂
Who can afford to waste that many eggs these days?
Pres Trump will save us all from everything. He said so.
If the long term yields rise because the Federal Reserve is weak on inflation, then that seems to be a good thing. Looking at the 1970s, the longer the delay in actually solving inflation, the higher the interest rates need to be. The rates were sky high under Volcker, there is no fundamental reason we can’t experience the same again.
What’s not too like in the midst of an unsustainable, Goldilock’s economy with a mysterious, omnipresent bid, driving asset valuations to daily historical levels.
The only people that matter are the everyday people.
From whom the powerful claim their fortunes.
I find it a interesting that, even after this adjustment accounting for massive immigration, the Total Employment number still looks to be slightly below the pre-COVID trend line.
Yes, it’s quite a bit below trend. The biggest factor was the huge wave of retirements that happened during covid.
Wage or wave?
Thanks.
though “wage” also worked in a way LOL
1:04 PM 2/7/2025
Dow 44,303.40 -444.23 -0.99%
S&P 500 6,025.99 -57.58 -0.95%
Nasdaq 19,523.40 -268.59 -1.36%
VIX 16.52 1.02 6.58%
Gold 2,887.00 10.30 0.36%
Oil 71.00 0.39 0.55%
Out of curiosity and a deap respect for SoCalBeachDude…
Why do you repost this here?
Low unemployment rates have nothing to do with inflation. The Phillips curve is bunk and any Fed who believes in it should be fired.
I just scroll past when I see them.
MW: Stocks end sharply lower, book weekly losses amid tariff worries
“Sharply”? <1% for SPX, 1.3% for NAZ. GMAFB.
MW: January jobs report: Economy at full employment as wage pressure picks up
Consumer sentiment drops sharply in February as inflation worries soar
Inside the Fed, fears increase that Trump tariffs would boost inflation
Wolf, is the unemployment rate of 4% due to the major adjustment to household data. Second question, what is the final numbers for employment data and household data (after adjusting mass immigration)
1. The unemployment rate declined from 4.1% before the adjustment in December to 4.0% in January with the adjusted figures. So it was just a small move, and that makes sense since the immigrants are on both the numerator and denominator, though in different quantifies, and so part of that cancels out.
2. You’re looking at the final numbers adjusted for immigration. January was adjusted, and that’s what you’re looking at.
Avg hourly earnings @ +4.5% yoy (3mma) tells me inflation will continue to be red hot in services.
I’m guessing Musk will *&% can the entire BLS team next week. Good luck getting more timely jobs data to make informed policy decisions.
Nah, his 19 year old “disrupters” will do report it in 10% of the time and 2x as accurate. It’s easy. Just ask him.
I wonder is this an official audit of the government or a techno gathering of data to put into there useless models, which become obsolete at the moment the results are reported. One never knows what the AI model is likely to say within two standard deviations of the mean expected response.
Love is the answer.
…in the end, all departments will just default to the executive ‘Sharpie’ (…go long, Sharpie?).
may we all find a better day.
Think it was the first wife using dad’s $400B that kept him from going broke almost instantly…….but we’d probably have a different problem to focus on……instead of one who totally loves it……plus all the upset reactions he can deliver from the “other side”….
…….it’s all his supporters are ever going to get….they better enjoy it while they can.
Good stock tip buddy.
its a data heist by palantir.
Wonder how much of inflation expectations is media driven?
Tariffs suck, no doubt. But as I believe Wolf pointed out, the case is historically weak for tariffs being strongly correlated with inflation.
Tariffs are typically large cap poison, but it depends on other factors whether this poison kills earnings (by reducing margins and/or sales) or the consumer’s wallet.
Anywho, housing market still looking f*cked. Nervous S&P 500 might be f*ucked as well, TBD.
Agree with this. Although inflation is probably going up on its own and trumps tariffs instead of the feds premature cutting will be blamed
Inflation is inevitable for the forseeable future given the obvious over application of monetary excess these past 20 years.
At some point, the bill must be paid. When the personal income for families falls below the poverty line, one would think that perhaps our(us) priorities are misaligned with the apparent circumstances.
In Canada the unemployment rate unexpectedly fell before it rises into double digits later this year. Wage gains are in freefall mode.
So…since these data are all from the previous admin…what was so bad ? If it was inflation isn’t that the Fed’s fault? Or should Biden have ignored his oath to respect the ‘Independence of the Federal Reserve’ and demanded an increase in rates?
A lot of the US financial media seem to be more worried about the drastic new cures for whatever disease the economy had in the last 4 years.
China has to throw off it’s commie roots as the low cost scab that replaced American workers, which it was.
Which is one POV, on the other hand, Walmart’s spawn is out of control.
China has nothing to do with it. Wage labor is a commodity like any other and companies will chase the low cost they can get. It isn’t like China forced American companies to manufacture there.
Good news for many but for many wages gains are not nearly enough to offset the combination of back to normal mortgage rates but with very high home prices for those that want one. For a 500K house you would have to come up with around 1600 extra a month compared to low mortgage rates and housing 25% less.
Whether you are for or against deportations, deporting millions will increase inflation for things like food and housing. I have a feeling, like DOGE, there will be window dressing, but the overall implementation of said initiatives will be limited.
You are correct. They are NOT going to deport millions. They are clearly removing the worst and shutting off the incoming spigot.
What needs to happen next is a sound method to bringing these people to citizenship; which means proper registration/documentation and basic citizen training. Of course, the proper registration/documentation (including valid SS numbers) will DRAG OUT as the business community doesn’t want to see that.
Trump knows all of this; don’t be fooled.
Mike R,
Yes funny anyone buys that line. Even if they wanted to they don’t have the funding, ICE personnel, detention capabilities or court system to handle a fraction of it. It does sell well however. Nobody really wants to solve the issue as honestly not easy but also not rocket science either.
Basic citizen training?
Comon’ man. Mariachi and hopping low boys are cool!
You one of those ones who want Ozzie and Harriet?
This is hilarious. Do you know anyone who has been picked up? Do you know anyone who is living in fear of a knock on the door? You have no idea, dude. My grandson is afraid all his friends are going to going to be rounded up and shipped out. He is right to be afraid, not like the clueless who whine, “We didn’t vote for this.” Yeah you did. Sow the wind, reap the whirlwind, mofos.
Well said. Clarity!!
Looking at where many of those recent jobs have been created, which seem to be in the care sector, personal service industries, couriers I’m no longer convinced there will be a surge in inflation. People will just have to start cleaning their own houses again and cutting their own grass, looking after their own family, you are not going to get people moving into those low paid jobs, they will just disappear.
The other area of recent job growth seems to be in the government payroll. DOGE looks like it will reverse that adding many workers to take up any slack in areas that need workers.
BillMc,
This is always the case where immigration is a political tool only weaponized to avoid dealing with fundamental issues that exist. If the only two political parties don’t have each other and external influences to blame then people might turn against the system and that is the greatest fear. The issues facing Americans are all quite solvable if the political will existed but it would come at a cost to the ‘nobility’ and those that fund them and pull the strings.
Were H1-Bs and all the other various colors of “legitimate” immigration previously included in counts?
In the public media, for years now, the estimates for immigration have been all over the map – very large variance. Where does the Fed secure its numbers and how accurate are they?
How are those numbers collected and processed? Just the ones businesses report?
Census numbers? Ouch another sticky wicket.
1. yes, and there were this time too. It’s not the regular visa holders that fall through the cracks.
2. RTGDFA and click on the links in the article and read THOSE articles too. Nothing to do with the “Fed,” but with the Census Bureau and the BLS.
3. RTGDFA and click on the links in the article and read THOSE articles too.
I think the markets will start focusing on the debt ceiling problem. There isn’t a way to extend this time and the U S could default on its debt around March 14. Beware the ides of March.
When you control the government you can do almost anything. They can extend or even suspend it.
Beyond things like the debt limit, very little Americans have is protected in any real way. The Constitution is mostly subject to interpretation (Jus Soli for example) and SCOTUS are political appointees. Laws can always be undone if you control government.
But that ambiguity and uncertainty built into our legal system and to a certain extent our Constitution is what has made America great. Individuals are forced to decide for themselves how to improve their lives, the classic enlightened self interest story. We cannot rely on a monolithic unchanging government to force its dictates on us, as is done in theocratic, monarchic, and communist/socialist countries. We have to learn, to adapt, to innovate, to do work-arounds, to survive and maybe thrive. Those who don’t or can’t end up sleeping under overpasses.
Your last sentence summarized the need for true socialism perfectly. Make it on your own or you get tossed to the curb essentially. Who cares if shelter, health care and many other things are out of reach. Our so called constitution has allowed unlimited funding of political parties and basic liberties to be taken away. A democracy for purchase is no democracy.
True socialism is where everybody sleeps under an overpass.
“True socialism is where everybody sleeps under an overpass”…except the leaders of the cult.
“All animals are equal, but some are more equal than others.”
Damn…….Aristotle really fucked people’s thinking up.
I traced the most damage to him, anyway….so far…….but there are many many others worthy of “honerable” mention…..so to speak.
Bronze Age Collapse V 2.0 ???