NFP: Is Good News Bad News?

Over the years, I have spilled far too many pixels on how overhyped the monthly nonfarm payroll report is. What matters isn’t any single month, given how noisy and subject to future revisions the provisional release actually is. The recency effect makes you place a greater emphasis on what just occurred in a data series, a sign of the evolutionary leftover code hanging around your wetware.

Someone correctly guesses the number each month, but it seems to be fairly random as to which economist tossed the lucky dart. Instead of playing this game, let’s look at the trend within the context of the broader economic environment. As I have noted before, this is a post-credit crisis recovery. As such, this cycle should be weaker than the typical postwar recession cycle: low growth, slower job creation, weak wage pressure. And so it has been.

Where that picture got confusing was in the first quarter. Gross domestic product contracted at an annualized rate of 0.7 percent; job gains also markedly slowed. A Bloomberg report noted that monthly job gains have slowed this year, averaging 193,750 compared with almost 260,000 last year. Was that first-quarter an aberration, or is the economy beginning to decelerate?

If you want to make excuses for the weak GDP and jobs performance, you have your choice of reasons: The weather across much of the country was awful,  hurting retail sales and manufacturing, and a port strike depressed imports. The strong dollar is a drag on U.S. manufacturers as well. Europe and Greece remain a concern; China’s economy has slowed for three years and government efforts there to stimulate growth seem to have only created a huge stock market bubble.


Continues here: The Search for Meaning in Jobs Numbers


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  1. VennData commented on Jun 5

    Hasn’t China’s economic growth rate slowed, not the economy itself?

    American has over $15T in Federal debt. For a seventeen trillion dollar economy, spread that back over the decades and it hugely boosts growth.

    We are still deficit spending, but it seems odd to me people say the US economy should expect over three percent growth with deficit spending.

    • Futuredome commented on Jun 5

      You have to adjust for inflation/GDP. Lets say the US runs a 300 billion dollar deficit in 2014-15 budget timeperiod. That is not “deficit” spending. That is basically a “real” balanced budget. No, the US has not “deficit” spent much since the mid-90’s.

  2. Futuredome commented on Jun 5

    Considering 125,000 is the baseline and add about 50 Thousand for a solidly paced recovery, 250+ last year was unsustainable. 193,000 is nothing to sneeze at. 220,000 is very strong and probably
    Almost all American based employment is tied into the service sector. This imo, is causing some the confusion. I would not be surprised we don’t overweight industrial production on our models causing distortions in GDP. A growing and growing segment of employment workforce is for flexible service work that comes and goes as the owner/management pleases. The days of the solid labor union company “career” position in manufacturing is long over.

    The US isn’t deficit spending. Weird post. Running a deficit, especially this year, when the “real” deficit will be probably about neutral is not deficit spending.

  3. willid3 commented on Jun 5

    i know that there are a few states that dont have income tax, but most do, so why not use the tax receipts to count employment since only companies that fail tend to not pay the taxes they collected. course you would have account for the duplicates but thats not all that hard to do, and you would also have to account for failed businesses, but you have to do that any way

  4. formerlawyer commented on Jun 7

    John Williams has attempted to do just that:

    His claims, at least with respect to inflation and debt have been challenged:

    His blog has been characterized as a chronic doom and gloom i.e.. government stats are manipulated but then he uses the same stats as the basis for his arguments!

    I would take this with a grain of salt.

  5. RobertKerr commented on Jun 8

    Mr. RItholtz sees the bubble in China’s stock markets, but apparently not the just-as-obvious and just-as-huge one is the US markets. It’s odd (but well documented) how people can see something 10,000 miles away but not right under their own nose.

Read this next.

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