US: Questioning payroll strength – Standard Chartered

Standard Chartered’s Steve Englander and Dan Pan argue that United States (US) labour market strength may be overstated once model-based adjustments are stripped out. They estimate that around 35k monthly Nonfarm Payrolls (NFP) jobs are needed to keep the unemployment rate flat, but suggest true jobs growth could be near zero when a more realistic view of firm births and deaths is applied.

Standard Chartered challenges NFP signal

"We estimate that it takes about 35k non-farm payroll (NFP) jobs per month to keep the unemployment rate stable. However, published NFP consists of jobs gains from firms in continuous operations which comes from the Bureau of Labor Statistics (BLS) monthly sample, and an estimated birth-death adjustment (B-D) derived from a model that remains questionable."

"The B-D remains unrealistically stable and high at around 75k on our seasonally adjusted basis. Excluding B-D, equilibrium private NFP growth among firms in continuous operation appears to be -35k, very unusual for a normal growth period, but similar to early 2025 and late 2024."

"Business Employment Dynamics data suggest that monthly jobs created by new firms less those lost from closing firms might be closer to 35k rather than the B-D’s 75k, so published NFP growth of 35k might correspond to actual jobs gains that are flat."

"We prefer the Business Employment Dynamics estimate of jobs created by newly opened firms because it is the only series designed to distinguish between new, closing and continuing firm job dynamics."

"Our first recommendation is that BLS separately publish the seasonally adjusted sample-based estimate of jobs creation by continuing firms. That is the only sample-based employment estimate captured by the payroll survey."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)