There’s no sunshine anywhere in Mudville, except for the handful of fans who, looking for something cheerful to say, revert to citing the Household Survey. (Recall we resolved that red herring years ago).
I find all the post-NFP blather to be almost disturbing in its Candide-like rationales. Why? It reflects a failure to comprehend why investors even track the job market in the first place. Considering that much of the noise comes from professional economists – who should know better – I find this to be disappointing.
Is it just me? Have I become a 44-year old curmudgeon?
The monthly jobs data is too noisy to focus on any one single point; That’s even more true post Katrina/Rita/Wilma. So why concoct all this happy talk?
Further, the Employment Situation is not a Baseball team. Analysts should not be rooting for the home team. They should be dispassionately sifting through the piles of data to provide some broader economic insight. Unfortunately, this kind of analysis is becoming rare.
This doesn’t mean that investors should be ignoring NFP data. But instead of getting whipsawed by the headlines, I want to direct your focus on the longer-term trend, and on the broader employment situation. Consider if you will how this data may impact future spending. Consumer spending is normally ~70% of the economy; given the modest Corporate Capital Expenditures of late, the economy is ever more reliant on consumer spending than normal.
When we take all of the economic data in its totality, the situation is not nearly as robust as the cheerleaders would have you believe: Real Wages are negative, as is the Savings Rate. We know that the prelim Q3 GDP of 3.8% was boosted by Uncle Sam’s profligacy, and via GM and Ford’s giveaways. Neither GM nor the US can be expected to continue at that.