Distorted Data How Government Buyouts May Mask the Real US Jobs Market
The Fed’s dual mandate means that both inflation and the unemployment rate will play a key role in determining the pace of future rate cuts. The recent US government buyout programme, offering some federal employees around eight months’ salary to resign voluntarily, introduces an additional layer of complexity to labour market data. While framed as a workforce reduction strategy, this initiative may lead to distortions in payroll figures over the coming months. Reports indicate that approximately 77,000 federal employees have accepted the buyout offer, adding a substantial number of potential new jobseekers to the labour market.
The Bureau of Labor Statistics (BLS) counts jobs rather than individuals in its Establishment Survey, which produces the widely followed "nonfarm payrolls" number. If a person holds two jobs, they are counted twice. Federal employees accepting buyouts will continue receiving pay and benefits for a deferred period while remaining free to seek other employment. If many of these individuals take new jobs while still technically on the government payroll, payroll figures could be artificially inflated.
The full impact of this buyout programme will only become clearer once the deferred resignation period ends, likely around September 2025. Until then, payroll gains may appear stronger than they actually are, as some job increases will come from individuals holding new roles while still receiving government payments. This does not mean the payroll data is incorrect, but it does create an unusual scenario that could misrepresent the scale of actual job creation.
Other labour market indicators add further complexity. Over the past month, multiple jobholder numbers have risen sharply, increasing by 286,000 in January from 8.478 million to 8.764 million. This suggests more individuals are taking on extra work, possibly to supplement income. Additionally, part-time for economic reasons has increased by 119,000, indicating more workers are being forced into part-time roles due to reduced hours or a lack of full-time opportunities. Despite a low unemployment rate, these figures suggest underlying pressures in the job market.
Wage growth and labour force participation trends will also be important to monitor in the months ahead. If wage growth slows while more individuals take on additional jobs, it could signal financial strain among workers rather than genuine labour market strength. The extent to which these trends persist as the buyout programme concludes in autumn 2025 will be key in determining the longer-term effects on employment data. While headline figures may appear robust, deeper structural shifts in the workforce may tell a different story.
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