Labor Data is Actually a LOT Worse than it Looked, and it Already Looked Bad!

Just as I expected, the government’s report on jobs Thursday totally contradicted ADP’s Wednesday payroll data report. The stock market ignored the abysmal ADP report but then soared with relief when the government report came in, saying what investors wanted to hear. Here were the raw numbers to show the difference:

ADP Reports Private Sector Lost 33,000 Jobs in June. Economists Expected 95,000 New Ones

That compared a day later against …

U.S. payrolls increased by 147,000 in June, more than expected

Well, 147k might have been more than expected, for which the stock market rejoiced, but it is still below the bare minimum of 150,000 net job additions each month that are necessary just to keep up with the population growth rate as it feeds into the labor pool. So, it is a slightly recessionary number.

Looking at the first report, The Daily Mail out of the UK reported,

Shock job report shows worst employment drop in years in massive blow to Trump economy

The article gave the following explanation for the loss in jobs, which was not so much that firing was up but that replacement hiring was way down. (Other articles provided similar analysis.)

'Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,' Nela Richardson, ADP's chief economist said in a statement.

And the reason given for that failure to hire is the Trump Tariffs:

Companies have looked to tighten their payrolls in the face of high tariff bills and economic uncertainty caused by chaotic policy.

It comes after the economy contracted in the first quarter of the year and economists are increasingly concerned about the risk of a recession.

So, already the tariff damage is coming in and recession is breathing down our backs.

In fact, the steep losses weren’t due to DOGE firings at all because just the exact opposite of what one would expect from DOGE showed up in the government report that came out on Thursday (a day earlier than usual due to Friday being a national holiday):

Here’s where the jobs are for June 2025 — government sector leads the way

Not only is the damage in the payroll-based non-government (ADP)report coming due to tariffs, but the growth reported in Thursday’s government report came from a major addition of government jobs!

Seriously? DOGE is supposed to be making huge government cuts, yet most job growth came from government expansion? No wonder Elon Musk quit in a storm of bridge-burning fury. It would be easy for the government to rig a good jobs report when the administration could just hire, at will, boatloads of people on your and my dime via Big Bloated Bill in order to pad the jobs numbers.

This government appears hypocritical in massively raising the budget while boasting about DOGE cuts, which is what has Musk incensed because he took all the heat over making truly drastic cuts (that were, yes, poorly done and ham-fisted, many having to be immediately reversed by DOGE because they were mistakes) only to see government expand! He dit it crudely, but he also did it FOR NOTHING—AS IN NO GOOD END RESULT.

And, for this, the Trump economy got praised by the stock market, which showed its ready approval for any good jobs number that comes in to justify investor desire to raise stock prices, even if half of the very limp job gains were government hires by a government that should be desperately cutting its costs in order to avoid the serious debt crisis that is forming.

Government jobs saw the largest month-over-month sector growth at 73,000, according to data from the federal Bureau of Labor Statistics released Thursday.

However (and this is a big however), the news was not quite as bad as my precursory glance above would indicate because most of that government job growth was not at the national level, but at the state and local level, complicating what we should make out of this picture:

“Government at the state and local levels did much of the hiring in June,” said Mark Hamrick, senior economic analyst at Bankrate. That helped “the total payrolls number to top expectations,” he said.

Regardless, why did the aggregate of government jobs not fall due to all those promised DOGE cuts? Even with state and local governments hiring most of the 73k, there were supposed be to a whole lot more DOGE reductions than 73k on the national level. Where were they?

State and local governments added a net total of 80k jobs, but …

On the other hand, the federal government payroll shrank by 7,000 jobs in the month. That’s unsurprising given the continued focus on government job-cutting initiatives under President Donald Trump.

It is actually very surprising. 7k in national government shrinkage is minuscule when DOGE has been reportedly slashing jobs left and right. Now, maybe the courts just bogged all of that down, but the Supreme Court has just allowed it to all move through. So, if courts are the only reason DOGE has accomplished NOTHING, then think of the negative change you will see in jobs in the next month’s report now that all of that is cleared to move through. Many of changes are scheduled to happen in months ahead, so that will mean negative job numbers in the Department of Lying Statistics report for months ahead, but a fair number of DOGE’s cuts were also supposed to happen immediately.

So, it is beyond ridiculous that stocks cavorted as they did (total irrational exuberance) over a very, very weak government report (slightly recessionary) that leaned heavily on growth in government jobs that we all know are slated to start falling off rapidly at the national level from the present month forward. (See: Dow rises 350 points, S&P 500 hits fresh record after a better-than-expected June jobs report)

Insanity.

And, the fall-off in government jobs likely gets even worse than just what DOGE might bring looking forward, because the boost from the state and local levels is not expected to keep offsetting the losses on the national level:

Bankrate’s Hamrick warned that it would be hard for state and local governments to sustain such strong growth.

That is especially true because most of the growth at the state level was in education jobs, and the federal government has just destroyed the Department of Education. I’m not sad to see that department go, given its hell-bent nature on social engineering over real education; but, with the department, goes a huge amount of federal funding that has been destroyed, too. That means all those states may now have to find their own funding if they are going to keep up those hires. In fact, maybe that explains the rush of new education hires at state levels. Could states have been front-running the federal education cuts to get hands on remaining available funds and lock them in before future funds are terminated? I don’t know, but many people and businesses have been front-running a lot of whatTrump is doing. So, maybe schools, too.

Meanwhile, as government hiring experienced a surge …

Professional and business services, manufacturing and wholesale trade each lost around 7,000 net jobs in June.

That leaves absolutely NOTHING in either of these jobs reports that shows hope for the Main Street economy. What meager good there was from government hiring is already all scheduled to fade rapidly with many of the DOGE cuts set to begin around late August/September, which, even if state and local government hiring did continue apace, should more than offset those numbers.

In fact, the Mises Institute, which believes in reality-based accounting, as opposed to the government kind that often appears a little goal-seeking, reported,

Half of June’s Job Growth Was in Government.

June’s surge in government jobs was the largest month-to-month jump in government jobs in 16 months. Over the past five years, government jobs growth was higher in only seven other months. Meanwhile, private sector job growth in June was at a nine-month low. In many ways this represents a return to Biden-era job data which showed—especially in 2024—that government employment was an increasing share of employment overall….

That is, government job growth helped to give the illusion of economic growth when, in reality, job growth was becoming more and more reliant on government….

With that, I want to point out the duplicity and hypocrisy of Zero Hedge that has gone all in on Trump praise and pandering in order to build its audience. Throughout the Biden years ZH constantly praised ADP for having the right numbers and sharply rebuked the government numbers for their fakery on the basis that, unliked the ADP numbers, 1) the BLS numbers almost always get revised down in later months when no one is looking (same as my criticism was back then … and still is on my part); 2) each year, the government data typically gets an annual audit that results in another half million to one-million jobs being subtracted out; 3) the sampling rate had become grossly inferior in recent years due to many businesses refusing take part. ZH routinely stated the BLS numbers were a farce … until Trump got elected.

Listen to them now:

Blowout June Payrolls: 147K Jobs Added, Smashing Expectations [referring to the BLS report]

…In the end, it turned out to be just another headfake by ADP which now has the same credibility as UMich, because moments ago the BLS published a blowout job report: in June, the US added 147K payrolls, blowing away the median estimate of 106K, and higher than the upward revised May print of 144K.

Not only is a government report that was slightly recessionary at a meager 147k new jobs, overrated as a “blowout job report,” but ADP is suddenly the report full of fakery on the basis that the government gold-standard in job reports disagreed with it. Throughout Biden’s term they would have stated that ADP was fact-based payroll data, showing what a fraud the government report was. However, since Zero Hedge has constantly been shilling for Trump and MAGA this year and claiming tariffs won’t cause inflation, suddenly they are taking the exact opposite position. If the government comes in higher than ADP with a blowout (albeit slightly recessionary blowout) jobs report, then clearly ADP is pulling headfakery.

In fact, ZH even praised the Trump admin for revising all of its number upward:

Remarkably, and in a dramatic change from the Biden tradition, previous months were revised higher: April was revised up by 11,000, from +147,000 to +158,000, and the change for May was revised up by 5,000, from +139,000 to +144,000.

Is that more honest, or is that more gratuitous? With Biden, they always said the revisions were because they were padding the first release of numbers. So did I. I am, however, reluctant to think the Trump government has suddenly found religion on the numbers and stopped padding their “seasonal adjustments” in the first releases or playing all the other familiar government ricks and is, instead, issuing conservative figures then raising them if it finds merit in doing so months down the road.

That could be, I suppose. Or, seeing what I have of Trump, he may just be saying, “We need to get all our numbers up, so go back and see if you can find reasons to make those previous numbers better, too.” I don’t know, but I’m certainly not jumping to the conclusion that all these positive adjustments now when the numbers are looking quite pathetic (at an increase of only 147k) are a sudden impulse to be conservative about the initial releases. Being conservative on self-praise doesn’t fit the Trumpian mode where he always boasts of the best numbers for everything—all the best numbers, best deals, best words, etc.

ZH goes on:

Perhaps an even bigger surprise was the unemployment rate which dropped from 4.2% to 4.1%, denying expectations of an increase to 4.3%, and far below the Fed's recently upward revised estimate of a 4.5%.

Exactly, so which numbers are you going to believe? Are you going to just assume the government’s big surprise numbers are the right ones, especially after it has been stripped of its workforce? Are you just going to assume it is now putting out more accurate numbers than ADP and others, such as the Fed; or is the government’s declining unemployment number the one that looks out of line with reality, given that 147k was far from what stock analysts seemed to be bragging the number up to be. When even the best number is a slightly recessionary number, how do you justify claims that unemployment fell? I think the burden of proof lands on justifying the drop in unemployment at a time when new jobs are marginally recessionary even by the most positive and most-suspect measure.

In fact, unemployment looks even more questionable when you dig a little deeper into ZH’s own article:

In June, the number of long-term unemployed (those jobless for 27 weeks or more) increased by 190,000 to 1.6 million, largely offsetting a decrease in the prior month….

Among those not in the labor force who wanted a job, the number of people marginally attached to the labor force increased by 234,000 in June to 1.8 million. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. [I.e., they gave up.]

The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, increased by 256,000 in June to 637,000.

While its hard to see how that adds up to falling unemployment, ZH concludes,

Overall, this was a stellar jobs report - at least relative to expectations….

Oh, and finally, never listen to ADP ever again: with a near-record spread of 180K between the two series (-33K for ADP, +147K for NFP), the ADP Private Payrolls report has as much credibility as the marxist cesspool that is the UMich consumer confidence survey.

In other words, the proof that it is wrong is that it disagrees remarkably from the government report. That is not what they ever said during the Biden days, and none of their deeper numbers even remotely support a picture of falling unemployment that I can make out. Of course, the modus operandi for Russian disinformation, especially under Putin, is not to sow outright lies but to sow confusion; so, now let’s dig into the bedrock reality of some of these suspicious looking numbers.

*********