At issue, Schickling said, are the mixed signals being sent by the two surveys that make up the jobs report. “A significant and persistent deviation between the household and establishment surveys has created a unique paradox of the unemployment rate rising 60 basis points since July 2023 even as job creation in the establishment survey has more than offset an increase in the labor force.”
Declining response rates since the COVID-19 pandemic have affected all labor market surveys, Schickling said, but the effect on the household survey of workers and job candidates has been especially pronounced given that the survey was relatively small to begin with. Additionally, Vanguard believes that the separate establishment survey of workplaces is quicker than the household survey to reflect immigration dynamics that have fueled recent job growth. Because the Sahm rule uses unemployment rate metrics, it is based on the household survey, which we see as less reliable than it traditionally has been.
While its momentum has slowed, the labor market remains strong, and any imminent recession signal is likely to be a false one.
