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- Friday's October jobs report showed an economy that is pretty good, adding 531,000 jobs.
- It revised the figures upward from August and September, too.
- Preliminary figures have been coming in below revisions, resulting in warped discourse – and policy.
This fall, President Joe Biden "gambled" that cutting off federal unemployment benefits would get Americans back to work and help end the labor shortage, but September data "blew a hole" through that strategy.
Except it actually didn't.
This spring, Biden's recovery was "stumbling," as April data showed how experts had "badly misjudge(d)" the labor-market recovery.
Except it wasn't, really.
All of the quotes above come from Insider headlines on the September and April jobs reports, respectively. They were entirely accurate at the time, but they were based on preliminary data that were substantially revised in subsequent months.
The problem is the preliminary data have come to dominate markets and policy-making. By the time the complete data comes in, it's often too late to change a major policy decision.
Take the issue of unemployment benefits. When the April report came in at 266,000 payrolls, a huge miss from economist estimates of close to a million, Republican governors across the country seized on it as direct evidence that those benefits were too generous and keeping workers on the sidelines.
In the ensuing months, more than half the country ended the benefit early, cutting millions off from pandemic-relief aid in June, with the other 24 states retaining it through September. The data showed no direct link between the end of this relief and an end to the labor shortage. Through October, more than 7 million Americans are still out of work and record levels of around 4 million workers are quitting their jobs every month.
Biden and his Labor Secretary, Marty Walsh, chose not to oppose the 25 Republican governors (and one Democrat, in heavy red state Louisiana) who ended the benefit, even though some workers brought lawsuits that convinced judges to reinstate benefits in select states.
The October report blows a hole through the argument that Biden's gamble was a losing one, revising August's figure of 235,000 up to 366,000, and September's figure of 194,000 to 312,000. Going back to the beginning of the recovery last May, the revisions add a whopping 1.2 million jobs to the preliminary figures.
The chart below shows the difference between the final revised figures and the original preliminary figures from May 2020 through August 2021. As you can see, the economy has consistently produced more jobs than it looked like at first, under both Trump and Biden:
That's how a preliminary report is designed to work, but the political class and (raises hands) the media don't treat it that way. Instead, the reaction to the preliminary jobs report has real-world consequences.
For example, stocks soared to record highs on April 5 after the government announced the US added 916,000 jobs in March. Yet that sum was eventually updated to 785,000, the second-largest downward revision of the pandemic recovery. Since final revisions arrive two months after the first reading, preliminary prints typically overshadow finalized data, especially among investors.
Last month's preliminary data came at a critical time for Biden's economic agenda, with his $1.75 trillion Build Back Better plan stuck in Congressional limbo. Centrist Democrats including Sens. Kyrsten Sinema and Joe Manchin have delayed the plan's passage for months, with the latter recently saying he wanted "greater clarity" on the package's effects.
Yet Biden was quick to use the preliminary data to his advantage. Citing momentum from the strong October print, the president urged lawmakers to push forward with his spending agenda "right now" and put months-long negotiations to rest.
Maybe the big revisions in October will change the conversation around preliminary and revised labor-market data. Owen Davis, a research assistant at the Schwartz Center for Economic Analysis, wrote on Twitter that "news headlines would have been a bit different if these were the initial numbers reported."
And Justin Wolfers, a left-leaning economist at the University of Michigan, simply wrote: "Revisions are a game changer."
Be that as it may, when the past jobs numbers were revised, the unemployment benefits weren't reinstated and the Biden agenda hasn't yet passed. Preliminary is one thing, but policy is permanent.