The mystery of disappearing jobs: The Labor Department under Biden and Harris is to blame

The Department of Labor under Biden and Harris seems to exist in a fantasy land.

Month after month, they released groundbreaking labor market reports, only to revise the numbers downward in subsequent releases.

The problem has become so entrenched that members of Congress are wondering if there is something sinister going on behind the scenes.

The latest data show that initial estimates of job growth for the year ending March 2024 were significantly overestimated by 1.2 million jobs – a third of total expected job growth.

Senate Republicans have had enough of these false numbers and are demanding answers.

Although there is no conclusive evidence yet, some suspect that government statisticians are lying by concealing facts.

The Labor Department released its preliminary annual benchmark last week, as it typically does each year when better labor market data becomes available.

As part of normal operating procedures, these figures are used to adjust monthly employment figures.

What makes this year's benchmark so unusual, however, is the magnitude of the downward revision: At 818,000, it is the largest decline since 2009, when the labor market bottomed out in the depths of the Great Recession.

At that time, economic conditions were deteriorating so rapidly that the Labor Department's statistical models were no longer producing accurate results.

Assumptions that made perfect sense in 2005 led to wrong results in 2009 – garbage in, garbage out.

The same problem seems to be occurring today and has been present since spring 2022.

Here, too, the problem is not simply that economic data is being revised; this is routine.

Rather, the alarm bells should be ringing because the employment figures are being revised so consistently down by such large amounts.

These new benchmark data with a decline of over 800,000 jobs are bad enough – but the situation is even worse when you consider that they are in addition to the existing Downward revisions to the monthly employment reports.

Overall, employment growth was overestimated by 1.2 million within a twelve-month period.

Destroying a third of all job gains over the course of a year is equivalent to losing four whole months in the calendar.

What's even more frustrating is that this came as no surprise to those who follow the labor market closely.

In the manufacturing sector, for example, numerous private data indicate that losses and this has been the case for over a year, although the Ministry of Labour has reported an increase in employment.

It turns out that the sector has actually lost jobs, by over 100,000 since the beginning of 2023.

The problem of gross overestimation of employment growth is due in large part to the “birth-death model” that the Department of Labor uses to estimate employment data.

This statistical model attempts to account for the number of new businesses founded and closed each month – and it is completely wrong.

In short, the birth-death model has been strongly overestimating the number of firms in the American economy, assuming no firms and the jobs associated with them exist.

Before the COVID pandemic, the economy was responsible for robust business creation and job creation. However, under current conditions, this is no longer the case.

The statistical assumptions that made sense in 2019 are worthless today.

But even the strong surge in business creation reported by the Labor Department immediately after the end of the COVID lockdowns did not reflect reality.

It turned out that this was just an illusion and that it was a widespread scam in which fraudsters “created” companies to get government subsidies – but these companies never actually hired people.

Assuming that the number of new firms being created today is artificially high and does not reflect the actual economic situation, the birth-death model still regularly overestimates employment growth.

And the problem remains unsolved: in the non-seasonally adjusted data, 908,000 new jobs have been created since the beginning of the year.

Over the past 12 months, the model has “added” 1.3 million new jobs—more than half of the 2.5 million new jobs the Labor Department believes it has created.

To be clear, some of the employment gains that result from the birth-death model are actually real, but most of them are probably a statistical error.

Policymakers from Wall Street to Congress to the Federal Reserve rely on this data to make important decisions, so it's imperative that the numbers are as accurate as possible.

The Department of Labor owes Congress and the American people a full explanation of what is wrong with its models and methods – and why nothing has been done to fix the obvious problems.

EJ Antoni, a finance scholar, is a Richard F. Aster Fellow at the Heritage Foundation and a senior fellow at Unleash Prosperity.