Standard Chartered analysts Steve Englander and Dan Pan have raised concerns regarding the perceived strength of the United States labor market, specifically questioning the reliability of Nonfarm Payrolls (NFP) data once model-based adjustments are excluded [1]. According to their analysis, approximately 35,000 monthly NFP jobs are required to maintain a stable unemployment rate [1]. However, they argue that the actual jobs growth could be close to zero when a more realistic assessment of firm births and deaths is considered [1].
The analysts highlight that the published NFP figures include gains from firms in continuous operation, as well as an estimated birth-death (B-D) adjustment derived from a model they describe as 'questionable' [1]. They note that the B-D adjustment remains 'unrealistically stable and high' at around 75,000 on a seasonally adjusted basis [1]. Excluding this adjustment, equilibrium private NFP growth among continuing firms appears to be negative 35,000, which is atypical for a period of normal economic growth and is more consistent with projections for early 2025 and late 2024 [1].
Citing Business Employment Dynamics data, Englander and Pan suggest that the net monthly jobs created by new firms, after accounting for those lost from closing firms, might be closer to 35,000 rather than the B-D model's 75,000 estimate [1]. This implies that a published NFP growth of 35,000 could actually reflect flat job gains in reality [1]. The analysts advocate for the use of Business Employment Dynamics estimates, as this series is specifically designed to distinguish between job creation by new, closing, and continuing firms [1].
As a recommendation, Standard Chartered urges the Bureau of Labor Statistics (BLS) to separately publish the seasonally adjusted, sample-based estimate of job creation by continuing firms, arguing that this would provide a more accurate, sample-based employment estimate from the payroll survey [1].
CONCLUSION
Standard Chartered's analysis suggests that the strength of US payroll growth may be overstated due to questionable model-based adjustments. If their assessment holds, the labor market may be less robust than headline NFP figures indicate, potentially influencing market expectations for economic growth and monetary policy.