Analysts at Standard Chartered warn that the widely watched US jobs data may be overstating labor market strength, arguing that employment gains could be close to flat when model-based estimates are removed.
Steve Englander and Dan Pan estimate that the US economy needs around 35,000 new jobs per month to keep the unemployment rate steady. On their calculations, however, underlying job growth may be “near zero” once more realistic assumptions about business openings and closures are applied to official figures.
How the payroll numbers are built
Their critique centers on the US Bureau of Labor Statistics’ (BLS) monthly nonfarm payrolls report. The headline number combines:
- job changes at existing firms captured directly by the payroll survey, and
- a separate, model-based “birth-death” adjustment meant to account for new firms starting up and existing firms shutting down.
According to Englander and Pan, the birth-death component has been running at a roughly stable 75,000 jobs per month. After seasonal adjustment, they argue, this may be overstating true job creation from new firms and underestimating losses from closures.
What happens when the model is excluded
When Standard Chartered stripped out the birth-death adjustment, payroll growth among continuing private nonfarm firms turned negative, at roughly minus 35,000 jobs per month. They describe this as unusual for a period classified as economic expansion, but say it is consistent with patterns seen in late 2024 and early 2025.
To cross-check the model, they used Business Employment Dynamics (BED) data, which track job gains and losses from business births and deaths. That series suggests net job creation from firm openings minus closures is closer to 35,000 per month, not the 75,000 implied by the birth-death model.
Under that framework, a reported payroll gain of 35,000 would not signal new job creation, but rather an economy that is roughly maintaining its existing level of employment.
Call for cleaner data from ongoing firms
Englander and Pan propose that the BLS publish a separate, seasonally adjusted payroll measure that includes only employment changes at the surveyed ongoing firms. That would isolate the portion of job growth directly recorded by the survey, without any contribution from model-based birth-death estimates.
They argue this would give traders and policymakers a clearer view of the underlying labor trend and reduce reliance on a statistical model whose assumptions might no longer fit current business dynamics.
Implications for recent jobs reports
The Standard Chartered analysis implies that headline job growth figures may be painting an overly optimistic picture. A sizable share of the reported gains each month comes not from survey responses but from the birth-death model, which Englander and Pan see as potentially adding around 40,000 jobs more than what BED data would justify.
If that gap is real, the apparent strength in the US labor market may be weaker than current headlines suggest. For example, a nonfarm payrolls increase of 35,000 — often read as modestly positive — would, under their interpretation, indicate an essentially flat job market.
This perspective contrasts with the latest BLS report showing the economy added 178,000 jobs in March, beating expectations. The unemployment rate was little changed at 4.3%, with 7.2 million people unemployed.
Signals from participation and revisions
Beyond the headline payroll and unemployment figures, other details in the March report may point to a softer backdrop:
- The labor force participation rate fell to 61.9%, its lowest since late 2021, as 396,000 people left the labor force.
- Average hourly earnings rose just 0.2% in March, a modest pace that suggests limited wage pressure.
- Earlier months were revised: January was revised up by 34,000 jobs, while February was revised down by 41,000, for a net reduction of 7,000 compared with initially reported figures.
Englander and Pan contend that when potentially inflated model-based job gains are viewed alongside a shrinking labor force and modest wage growth, the overall picture is of a cooling, not accelerating, labor market.
What this means for market watchers
For those tracking macro conditions, the analysis underscores the need to look beyond the single, model-adjusted headline payroll number. Key points to monitor include:
- job changes at continuing firms, if published separately,
- the scale and direction of revisions to previous payroll estimates,
- labor force participation and unemployment together, and
- complementary indicators such as wage growth and quits rates.
Standard Chartered’s critique does not claim the official data are incorrect, but suggests that relying heavily on a stable birth-death model in a shifting business environment may distort the perceived strength of US job creation.
Worried how weak jobs data could hit crypto? Learn to manage volatility with these risk management strategies today.
Disclaimer: The content on this page is provided for general informational purposes only and does not represent the views or financial advice of Toobit. We make no guarantees regarding the accuracy or completeness of this information and shall not be held liable for any errors, omissions, or outcomes resulting from its use. Investing in digital assets involves risk; users should independently evaluate their financial situation and the risks involved. For further details, please consult our Terms of Service and Risk Disclosure.
