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