The Quarterly Census of Employ-To The Moon - Tiger Brokers Online Investing Community - To The Moon

The Quarterly Census of Employment and Wages (QCEW) is not one of the data releases surveyed for consensus forecasts. Data for Q1-2023 will be released on 23 August at 10:00am local time. We care about such a lagging release because (1) March QCEW data will be used for preliminary benchmark revisions to nonfarm payrolls (NFP);( 2) we expect QCEW to point to significant downward benchmark NFP revisions when these are released in February 2024; (3) the downward revisions are likely to be concentrated in late 2022 and early 2023; and (4) we suspect the forces leading to the downward revisions have persisted in mid-2023.

Our estimate of the downward NFP revision from March-December 2022 is about 500k. If we are correct that the birth-death adjustment is overstating employment growth we may see another 150k or so in Q1, so the downward NFP revision from March 2022-March 2023 could be around 650k overall. Since NFP is currently estimated to have gone up by 4mn over this period, this is not an overwhelming downward revision, but we expect much of it would be in Q4-2022 and Q1-2023.

Weak QCEW employment would alter the narrative of an extremely tight labour market, especially if softness is concentrated in recent quarters. The Fed would likely be calmer on the pass-through of higher policy rates if NFP was decelerating though end-2022 and early 2023 rather than remaining firm. Combined with decelerating NFP growth since March 2023, the implication would be that policy tightening had affected labour markets much earlier than now thought. Some of the backing-up of bond yields and pushing-out of expectations for rate cuts could be reversed.

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