A Jobs Mystery - How The Numbers Don't Add Up

This week, Wall Street discovered a mystery that has many seeing red, literally. Because when the official, government-reported numbers don’t add up, it sends the Street into a tailspin, prompting suspicions of the very worst. It all began with good news, you may have seen the headlines, US Job Growth Exceeds Expectation, that was quickly followed by another headline that showed that the Unemployment Rate held steady (at 4.7%).

So, if a bunch of new employees were hired (a reported 115K), and the number of unemployed did not go up (rate steady at 4.7%), then, as night follows day, it must follow that more people are working, happy days are here again!

Before we continue, we should note that all of these statistics come from the Department of Labor, the agency that has been most scrutinized among Federal Reporting Agencies. It is partly because the DOL deals with the country's politically charged employment conditions. Politicians throughout the nation point to increasing employment as the result of their policies, and, of course, declining employment is cast as the result of their opponents’ policies.

Bluntly put, every politician, including the current President and Congress, wants to see employment numbers rise during their term in office. We’ve seen the extreme pressure that President Trump exerted on the Federal Reserve to lower interest rates. Well, you can bet that the same amount of pressure is being put on the DOL to show positive employment numbers, just the sort of numbers that we saw in these two reports this week.

The Administration wanted just this sort of positive Payroll number (plus 115k) as it hit the headlines. “ Stop right there,” went the White House’s thinking. Indeed, most of the media did just that, stopping at a headline or a sound bite. But Wall Street went further; there was one more report that would prove the case of better national employment — the total Labor Force Report. If 115k new jobs were added, and unemployment remained the same (4.3%), then the total number of American workers must have increased, right?

Nope. That wasn’t the case; total US Employment is declining, not increasing. Wall Street cried foul; something is amiss. The Street was first to shout that this Administration must be cooking the books, how else could the number of new hires increase, unemployment remain steady, and yet the total number of workers decline? It is inexplicable.

You can bet that this will be a major issue in the coming Congressional Elections
which are beginning now.

 “How often have I said to you that when you have eliminated the impossible, whatever remains, however improbable, must be the truth? 
Sherlock Holmes in The Sign of the Four 

The reason so many disregard the DOL is that it is the one Reporting Department that deals most directly with major demographic trends nationwide. It was the DOL that muddled through the COVID-19 Pandemic, estimating employment and unemployment numbers that later proved far off the mark and had to be revised. 

Currently, the DOL must estimate those same employment figures during the retirement of the country’s largest generation, the Boomers. We are living during the Peak 65 years, which began in 2024 and is expected to continue until 2027. During this time, an estimated 11,200 Boomers retire daily! It’s no wonder that this created a headache for the DOL.

Case in point.

There’s an old high school buddy of mine who has worked in the purchasing department of a major manufacturing company for nearly his entire career. (I’m omitting his name or company.) It’s a remarkable track record of nearly 50 years of employment with the same company. He knows the end-to-end details of every component and raw material that the company uses to make its finished products.

 Nearly a decade ago, the company automated the purchasing process so that computers could now track and trace all those items. Nonetheless, they have continued to employ my friend because he often finds minor discrepancies in the quality or standards of the raw materials that enter the factory.

A month ago, the company approached my friend and offered him an enhanced retirement deal. After all, he is now in his 70s and has considered retiring. He accepted the offer and is now retired. So, what does that mean in the DOL Statistics Tables? He’s not unemployed; he wasn’t fired; he’s retired. 

The shorthand is that he doesn’t fit neatly into the Labor Department’s employment categories; he’s slipped between the cracks — no longer employed but neither unemployed nor laid off. And he’s not alone. In the past six months, over 1.5 million Boomers have joined him in retiring from their jobs. 

Thus, the labor force declines, but the unemployment rate remains unchanged. This appears to be what we’re seeing in the current DOL Labor Reports. A massive demographic shift is impacting the country, and the Department of Labor is struggling to report this dramatic change in our country’s workforce.

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Two other Economic Reports, published this week, deserve your attention.

Oil Rig Count.

We’re all feeling the impact of the high price of oil, and its refined products, diesel and gasoline. Of course, this is all due to the Iran War, which began on February 28. So, it’s especially interesting to watch the actions of major oil companies in their current drilling activity.

Although he’s been in office for less than 18 months, President Trump’s term has been among the most volatile for the oil patch. When Trump entered office in January 2025, oil companies had 489 oil rigs operating, about the same number they had operated since 1987. It seemed about right, with oil at $80/barrel. By August, oil had swooned to just $59/barrel, and drillers shut in 79 wells in response to the decline in demand. The price of oil remained depressed through January of this year, and I’m sure that the oil executives thought that this low demand likely meant a recession was on its way. Their call appeared to be right on the money in February, as demand and price remained low.

Then, out of the blue, came the Iran Conflict, undeclared, unannounced. President Trump initiated a war on the single largest supply of international oil. The price skyrocketed, and American Oil Companies were caught flat-footed. They now had too few rigs (410) actively drilling to meet demand. Unfortunately, it takes weeks or months to bring drilling rigs online, and that’s just where we are currently. According to Baker Hughes, one of the largest oil services companies, only one new rig started drilling last week. It looks like it’s going to be some time before American companies can meet the excessive demand coming from this ongoing war.

Consumer Sentiment

The University of Michigan has been tracking Consumer Sentiment since 1978, measuring the ups and downs of everyday Americans’ economic view of the country. In the 21st Century, Sentiment has fallen to below 50% four times, with more than half of Americans pessimistic about our future. The four previous times were due to the Financial Crisis of 2008, the economic turmoil and financial downgrade of US Debt in 2011, the reaction to the Ukraine War in 2022, and today. Because consumers’ actions are vital to economic activity, accounting for about 2/3 of all transactions, Sentiment is one of the most important measures of future growth or recession. Unless we see a turnaround soon, this negative Sentiment level will hang over the economy. Again, this will likely be a significant factor in the upcoming elections and in financial markets’ behavior.

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And that’s our look at this week’s most significant Economic reports.

A likely answer to the mysterious anomaly in Employment Results.
The Oil Industry was caught flat-footed by the Iran War.
And Consumer Sentiment is languishing at historic low levels.

REFEERENCES

Non-Farm Payroll: 
https://www.bls.gov/news.release/pdf/empsit.pdf

Civilian Unemployment Rate
https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm

Civilian Labor Force Level
https://fred.stlouisfed.org/series/CLF16OV

Oil Rig Count
https://rigcount.bakerhughes.com/

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