The US labor market has shown great resilience after the pandemic – together with the rest of the US economy – but employment has stood out as overly resilient with NFP and other labor data coming in very hot some months despite PMIs and consumer data hinting of a slowdown of the overall economy.

However, there might be a very good reason for this. Each month, payroll-data is adjusted with the ‘Birth/Death adjustment’, which takes into account the net job creation associated with opening/closing of businesses, and over a 6 month period, BLS has assumed that around 800-900k jobs were created on a net basis as a function of entrepreneurship alone. It’s very hard to argue that the post-pandemic period experienced a huge boom in entrepreneurism relative to history (Even after the GFC the Birth/Death adjustment was still 5-6 times lower than currently). 

Without the adjustment, there has been zero growth in private payrolls over the last 6 months.

Chart 1: The labor market is likely weaker beneath the surface