The latest jobs report for April disappointed, revealing that the US economy added only 175,000 jobs, falling short of economists’ expectations. David Rosenberg, famed for predicting the 2008 recession, questions the accuracy of the non-farm payroll data due to flaws in the Bureau of Labor Statistics (BLS) methods. He anticipates substantial downward revisions in the coming months.
Rosenberg highlights discrepancies between headline monthly jobs data and other BLS reports. He points to the BLS’ Business Employment Dynamics data, which showed a loss of 192,000 jobs in the third quarter of 2023, contrasting with the non-farm payrolls survey’s claim of a gain of 640,000 jobs over the same period. Additionally, the BLS’ Quarterly Census of Employment and Wages data indicates softer job growth in Q3 of the previous year.
Attributing the overstatement of non-farm payroll data to flawed data collection methods, Rosenberg emphasizes low response rates and the inability to track business closures accurately. He warns investors and the Federal Reserve to brace for unexpected downward revisions in the next six months.
Moreover, Rosenberg asserts that stock prices and valuations are detached from economic fundamentals. He identifies an AI stock bubble, noting a recent market downturn affecting major firms like Nvidia.
While Rosenberg has been consistently bearish, a recession has yet to materialize. Despite aggressive rate hikes by the Fed, the unemployment rate remains low, and consumer spending persists amidst elevated inflation. Nonetheless, recession indicators such as the inverted Treasury yield curve and rising layoff announcements signal potential economic challenges ahead.
Rosenberg’s primary concern is the Fed’s reliance on flawed data and its reluctance to acknowledge economic softness, risking a policy misstep by maintaining monetary restraint for too long. As uncertainties loom, the possibility of a recession remains a significant concern.
