Is America's labor market quietly collapsing while we argue over when the Fed should cut rates? I've been crunching the numbers lately, and something doesn't add up.
Let's face it — the economic story we're being told and the reality unfolding in households across America are increasingly disconnected. And it's not just a small discrepancy. We're talking potentially seismic.
Here's the troubling possibility I can't shake: What if we aren't adding those modest 27,000 jobs monthly since May (already a pretty anemic figure), but instead hemorrhaging over 300,000 jobs each month?
Yeah. Let that sink in.
The Fed's narrative—debating whether to cut rates in December or wait till who-knows-when—seems almost comically detached when you dig beneath the surface.
The Numbers Game
The Bureau of Labor Statistics has been reporting those modest monthly gains averaging around 27,000 since May. Not stellar by any stretch, but still positive territory.
But hang on. Remember earlier this year when the BLS dropped that bombshell benchmark revision of negative 911,000 jobs? That wasn't a rounding error or statistical hiccup—it was nearly a million jobs that simply... vanished. Jobs the government thought existed but didn't. Poof.
I've covered economic data for years, and revisions happen. But not like this.
The culprits behind this massive miss were pretty straightforward: weak payroll tax receipts (meaning people weren't actually getting paid), plummeting survey response rates (leaving the BLS partially flying blind), and overly rosy assumptions about business formation.
Now, has the BLS suddenly fixed these methodological problems? Not likely. If we assume similar measurement errors are happening now—and there's zero reason to believe otherwise—we're looking at a monthly undercount of roughly 76,000 jobs.
Do the math: Add that adjustment to the reported 27,000 monthly gain, and you're staring at negative 49,000 jobs per month.
That's right. Job losses, not gains.
The Tariff Tax Nobody Sees
But wait, there's another wrinkle in this economic fabric that makes the picture even more troubling.
The current tariff regime is effectively functioning as a massive, hidden tax on American households—about $1,500 annually per household. That's not my number; that's what the economists who study this stuff are calculating.
Multiply that across approximately 131 million U.S. households, and you've got around $200 billion in lost spending power.
What happens when consumers suddenly have $200 billion less to spend? Jobs disappear. Using average wage income of $65,000 per job, that translates to about 3.1 million jobs annually—or roughly 256,000 jobs per month that aren't materializing because of decreased consumer spending.
Add these two effects together—the likely BLS measurement error and the tariff-induced demand destruction—and the true labor market picture looks closer to negative 311,000 jobs monthly.
That's not a slowdown or a "soft landing." That's recession-level job loss hiding behind statistical quirks and policy effects.
The Inflation Misdirection
Look, headline PCE inflation sits at 2.9%—above the Fed's 2% target. Powell keeps pointing to this as justification for keeping rates elevated.
But (and this is crucial) tariffs are adding approximately half a percentage point to that figure. Strip out this policy-induced inflation, and underlying PCE is actually closer to 2.4%.
I'm sorry, but are we really keeping monetary policy restrictive over four-tenths of a percentage point? Especially when that's largely driven by policy choices, not natural market forces?
The Fed seems to be fighting yesterday's inflation battle while a very real jobs crisis might be unfolding right under our noses.
Powell's Puzzling Stance
Given all this, Powell's recent statement that "a further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it," feels wildly disconnected from economic reality.
I was on that press call. The tone was measured, confident. But the substance? If labor conditions are equivalent to losing over 300,000 jobs monthly and underlying inflation is effectively at target, maintaining restrictive monetary policy isn't prudence—it's potentially disastrous.
The Fed has a dual mandate: maximum employment and price stability. On inflation, they're fighting shadows. On employment, they might be missing a forest fire.
What This Means
Markets are currently taking Powell at his word, pricing in a decent chance of a December pause. But the data—when properly adjusted for known distortions—practically begs for continued rate cuts.
There's an old economist joke that goes: "The Federal Reserve will keep tightening until employment improves." It's supposed to be absurdist humor. It's not supposed to be actual policy.
Sometimes in economic reporting, the real story isn't in the headline numbers but in the revisions, adjustments, and footnotes. And right now, America's labor market collapse might be the biggest economic story hiding in plain sight.
I hope I'm wrong. But the numbers—the real numbers—suggest otherwise.
