BLS Badly Missed Jobs Call

• BLS Revises August Job Growth Up 48%
• TrimTabs Says Hefty Upward Revisions to BLS’ September Jobs Data Likely

TrimTabs Investment Research said Friday that the Bureau of Labor Statistics’ (BLS) hefty upward revision of its August job growth estimate proves that the BLS missed the important acceleration in job growth this summer because it relies on incomplete surveys that are frequently revised.

Numbers Discrepancy
Trimtabs said the BLS’ initial estimate for August job growth was 96,000. Friday, the BLS revised its August estimate upward 48% to 142,000 new jobs. Meanwhile the TrimTabs estimate, based on real-time withholding tax data, said employment growth in August was 185,000.

TrimTabs reported the U.S. economy added 210,000 jobs in September while the BLS reported a job gain of only 114,000. TrimTabs said it expects the BLS to revise its September jobs estimate of 114,000 substantially higher next month.

“We believe the BLS survey is badly underreporting the current acceleration in employment growth,” said Madeline Schnapp, Director of Macroeconomic Research at TrimTabs. “Nearly 84% of recent employment growth is occurring in small and medium sized businesses that fly below the BLS radar screen. Interest rate sensitive sectors of the economy, such as housing, mortgage refinancing, and vehicle sales, are experiencing more rapid growth than the BLS is currently reporting.”

Differing Indicators
TrimTabs’ employment estimates are based on an analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees. TrimTabs believes daily withholding tax deposits are a much better indicator of real-time employment growth than the initial monthly BLS employment estimate that is subjected to large seasonal and birth/death adjustments and frequently revised. Subsequent BLS revisions show that TrimTabs results are historically more accurate than the initial BLS estimates and frequently capture key turning points in economic growth long before other key economic indicators.

In a research note, TrimTabs reports that beginning in June, it began to observe an improvement in year-over-year growth in daily income tax withholdings. The upward trend has continued through September. TrimTabs highlights the improvements in real-time income tax withholding data that support the improvement in job growth. Specifically, wages and salaries rose 5.1% y-o-y in September, up from 3.8% y-o-y in August. Assuming that inflation is now running at about 1.7% y-o-y, September real wage and salary growth is 3.4% y-o-y, putting it squarely in the range of moderate economic growth for the first time since March 2011.

TrimTabs Investment Research is the only independent research service that publishes detailed daily coverage of U.S. stock market liquidity -- including mutual fund flows and exchange-traded fund flows -- as well as weekly withheld income and employment tax collections. Founded by Charles Biderman, TrimTabs has provided institutional investors with trading strategies since 1990.