Some Federal Reserve officials suspect that robust gains in payrolls may be overstating the strength of the labor market.
That’s according to the minutes of the Fed’s June 13-14 policymaking meeting released on Wednesday.
Other measures of employment – including the Labor Department’s household survey and Census report, and Fed staff’s own calculations – “suggested that job growth may have been weaker than indicated by payroll” statistics, the policymakers were reported to have noted during the meeting.
Nevertheless, almost all officials at last month’s gathering judged that additional increases in interest rates would be appropriate to help bring down inflation that’s well above the Fed’s 2% target, according to the minutes.
Read more: Fed Minutes Reveal Divisions Over Decision to Pause in June
Payrolls have risen an average 283,000 per month over the last three months. Data due out on Friday are expected to show they increased 225,000 in June, according to the median projection of economists surveyed by Bloomberg.
“We think the last several months of payrolls estimates will ultimately be revised down,” Bloomberg economist Stuart Paul wrote in a report on Wednesday that highlighted widening cracks in the labor market.
As evidence, he cited the Quarterly Census of Employment and Wages, a more comprehensive reading of the jobs market also carried out by the Labor Department but which comes out with a lag. Based on that report, he expects last year’s payrolls to be revised down by about 900,000 when the department updates the data in September.
Mark Zandi, chief economist for Moody’s Analytics, reckons that actual payroll gains are running an average of 150,000 to 200,000 per month, rather than the close to the 300,000 pace reported in the monthly jobs numbers.
Paul said the monthly payrolls report may be overestimating the number of jobs being created by new businesses in its so-called birth-death model.
The Labor Department draws its monthly payroll numbers from a survey of employers and its monthly estimate of the unemployment from a survey of households. In May, payrolls rose by 339,000 while employment as measured in the household survey tumbled by 310,000.
Fed staff also make their own calculations of private sector job growth drawing on payroll data from Automatic Data Processing Inc.
