Employment
In a previous post (“The Shutdown is Here”) I pointed out how happy the Trump administration must be, that the shutdown allows them to skip the BLS (“Bureau of Labor Statistics)” reports on employment and inflation. I suspect that the employment report which should have been released in the first week of October would probably not have been very good. After a disappointing non-farm payroll report for July, Trump fired the government official responsible for reporting the facts (see my post on “The Revenge of the Economists”). This time around he won’t be able to fire her again, since she is already gone.
In the absence of official US government statistics, alternative private statistics have become more important. The most popular among these is the “ADP National Employment Report”. ADP (Automatic Data Processing) Corporation provides Payroll services to many US businesses. Every month it calculates the pay for over 26 million employees in the US based on hours worked or monthly salary, considering numerous adjustments such as overtime pay, deductions for state and federal taxes etc.. This gives ADP an excellent vantage point from which to observe, virtually in real time, how many workers in what industry are hired or let go, how many hours they worked and how much they were paid.
By extrapolating from this data, ADP concludes that private employers shed 32,000 jobs in September. This is significantly below expectations.
The draw-back of the ADP Report is that it does not include government employees. As we know, this is the group that suffered the steepest job losses. Fortunately for them, most government employees benefit from a three month notice period. That means that the people that were fired in the DOGE orgy of firings of this spring, were still technically employed until about August or September. These job losses should start showing up in the official statistics just about now.
Besides the ADP report there are other private sources of employment data. The Carlyle Group, which has close to 300 companies in its portfolio also collects data on employment. Carlyle concludes that the September report, which should have been published in early October, would have shown that only about 17’000 jobs had been created, way below the expected 53’000 which would be needed to keep overall employment relatively stable. Carlyle’s estimate also does not include government employees.
The government data produced by the BLS comes from surveys of employers, including the government itself. If the responses to these surveys come back in time, the government’s estimates on employment are certainly more comprehensive and reliable. Unfortunately, by the time the report is due to be published, only about a third of the responses have been received. Therefore, the reports are always subject to revisions as more responses to the surveys are received by BLS. Furthermore, the BLS reports are always backward looking. This is why steering the economy with official statistics has been compared the steering a supertanker through dangerous channels while only looking in the review mirror.
The Trump administration has realized that the absence of the comprehensive employment reports that the BLS provides is a major problem. It has therefore decided to recall some employees of BLS and, according to the BLS Website, hopes to publish the employment data for September by October 21. But be prepared! Based on the near real-time information provided by private companies it is likely to be rather ugly.
Grocery Prices
Trump campaigned on a promise to lower grocery prices. But then he slapped tariffs on Mexico, raising the price of fresh foods imported from the US’ southern neighbor, and deported a large chunk of the agricultural labor force needed for harvesting what was produced locally. The idea of getting unemployed Americans to take these jobs has been tried in the sixties. It was a complete failure. The entirely foreseeable result of the Trump policies is that grocery prices not only stay high but are actually rising.
Grocery prices moved up 2.7% in August from a year ago, faster then overall inflation. The September report is not available yet, so the effect of the bad harvest season due to labor shortages is yet to come. According to the Washington Post the price of a typical sandwich or a barbecue has increased by five percent since Trump’s inauguration. That translates into an annual inflation rate of over 7.5 percent. At the same time wages have increased only 0.3 percent. The price of a fast-food meal has gone up three times faster than wages.
For now grocery inflation is primarily concentrated in the imported food segments. Coffee is now 21 percent more expensive. Halloween candy, especially chocolate, has also gone up, if it is available at all. Note that most the sugar that the US consumes is imported. Only the domestic price of soyabeans has slumped because China is now buying the soyabeans it needs from Brazil. Another blow to farm incomes due to Trump policies.
The price of beef will also increase. Most beef produced in the US is only fattened in feedlots in the US. The calves are imported primarily from Mexico and some from Canada. They are then held in feedlots in the US, pumped full of growth hormones to be fattened up for about a month before slaughter. The calves are subject to import duties, which will increase beef costs.
Conclusion: If you wanted higher grocery costs, you voted for Donald Trump.
By the way: US beef enters the EU completely free of any restrictions except that it has to be hormone free and “US produced”. Switzerland imposes a 10 percent import duty. Beef produced in the US on the basis of calves from sources other than the US does not count as “US beef”. Of the close to 8’000 beef producers in the US, less the 200, can document that they produce what would count as US beef.