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| E&S Review |
Data manipulated by these statistical methods are frequently revised without clear notification to the public, especially when administrations or public policies change.
Politicians Believe The Public Is Easy To Manipulate
The economic propaganda surrounding “hot” payrolls is amusing but a dangerous concept. It takes so little to guide the masses who want to be economic patriots above all else. The message of hot is repeated, so typically that majority begins to believe. It's almost as if reality doesn't matter.
We discussed the underlying economic trends in the Economy & Stocks 09/05/26 Report — Will The Real Economy Please Stand Up update. The economy is not necessarily what the headline numbers suggest—and with the right data, it is relatively easy to see what is really happening.
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The United States added 162,000 jobs in August, nearly three times the expected 53,000, while the unemployment rate remained at 4.1%. Although the headline number appears strong, a closer look reveals a more complicated labor market. As discussed in the Economy & Stocks 09/05/26 Report — Will The Real Economy Please Stand Up, the majority of the job gains came from food services, which added 59,000 jobs, and local government education, which added another 42,000. Combined, these two sectors accounted for approximately 63% of the headline job gain. Manufacturing and construction also posted gains of 16,000 and 22,000 jobs, respectively, offering some encouraging signs for sectors that contribute directly to the production of goods and infrastructure.
Wage growth remains another “undiscussed” concern. Although wages increased 0.3% in August and 3.1% over the past year, inflation, especially the real kind not reported by the government, continue to reduce overall standard of livings. Government economic strength through employment and wage statistics are celebrated by politicians. Households, whom they assume are easy to manipulate and stupid, view the real economy through the cost of housing, food, fuel, insurance, and debt. Assuming you have a job, a higher paycheck does not necessarily mean a better standard of living if inflation outpaces your gains.
The unemployment rate, which the public largely has accepted as undisputed truth until recently, is far weaker than the word “hot” suggests. The civilian labor force (CLF) began contracting year over year in 2026, a trend we haven’t seen since the Great Financial Crisis and COVID (see chart).
Chart: Civilian Labor Force Year of Year Change
The BLS largely interprets this decline as people leaving the workforce, retiring, or choosing not to participate. This explanation can obscure a more troubling reality that many would prefer to keep working, even into their later years, but the economy and labor market increasingly leave them with fewer opportunities to do so. More than 1.3 million people have reportedly left the labor force over the past year. Because people who stop actively searching for work are no longer counted as unemployed, the official unemployment rate does not fully capture the number of Americans who are struggling to find or maintain employment. Meanwhile, politicians will continue to tell you that everything is great, and unemployment rate, despite the statistical distortions employed by the BLS, remains at 4.1%
Long-term unemployment is another warning sign. About 7 million people were officially unemployed in August, including 1.9 million who had been unemployed for at least 27 weeks. This group represents roughly 27% of all officially unemployed workers, suggesting that some people are becoming increasingly disconnected from the labor market.
White-collar employment is also beginning to show signs of pressure. The information sector lost 23,000 jobs, including positions in data processing, web hosting, computing infrastructure, and publishing. At the same time, artificial intelligence (AI) is gradually changing the way businesses operate by automating routine and entry-level tasks, allowing companies to increase productivity without expanding payrolls at the same pace. This creates a particularly challenging environment for young college graduates entering the workforce, many of whom face significant student debt while having limited practical experience. AI may not be truly intelligent, but it is increasingly capable of performing the entry-level tasks that once provided new graduates with their first opportunity to gain experience and establish themselves in the workforce.
The stronger-than-expected interpretation of the report also has implications for the Federal Reserve and federal budget. The perception of strong employment gives the Federal Reserve less justification for quickly lowering interest rates, while higher rates increase the cost of servicing the government's $40 trillion plus debt. This creates a difficult policy dilemma for the Fed. Attempt to controlling inflation and protecting purchasing power of the US Dollar, or create further financial pressure by rising government borrowing costs. The invisible hand is already raising borrowing cost on the long end of the curve.
The August's employment report was stronger than expected, and the gains in manufacturing and construction are encouraging. The headline figure, unfortunately, creates a false assumption that the economy remains on solid footing. Subscribers to the Economy & Stock Report know the economic cycle, and can see the deterioration in the Economic Activity Composite. This is more important than any government economic statistic. While some Americans may see a stable economy and continued employment growth, others are facing weak hiring, automation, long-term unemployment, and declining standards of livings.
Step away from economic propaganda, and ask yourself what kinds of jobs are being created, and can they keep up with inflation? If the answer is no, then 162,000 jobs reported, many of which could be removed by future revisions, is not a sign of economic strength. The invisible hand which understands this and more creates and maintains trends that the public and politicians do not understand. This is why we follow the computer.
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