Authored by Peter Tchir via Academy Securities,
Normally, you can find some parts of the job report that “fight” against the headline. That somewhere in the details is a potentially different narrative.
Maybe it’s because I’m lazy on a summer Friday, but difficult to see what it is in this report.
But let’s start with the most important point
Instead of worrying about Warsh, what he did or didn’t say, how often he might or might not say things, to who he may or may not speak to, maybe we should worry about making decisions based on garbage data?
As you know, I’ve argued for years that it seems insane that in this day and age, where we have real time data on almost every aspect of our lives, we are content to kind of stick a finger in the air, and take a wild stab at estimating jobs. I think the data source task force is the most important (and potentially useful thing Warsh has created). The data task force is too limited in scope, if anything.
Establishment headline is -23k. Estimate was 80k.
Revisions for past two months were -103k! Maybe the estimate would not have been for 80k, if the initial reports for the prior months reflected reality and didn’t need to be revised lower?
Not sure this is “good” news for the workers, but wage growth was anemic (even as the renewed fighting in the Middle East is pushing up the price of energy products).
The unemployment rate has dropped from 4.3% to 4.1% in the past two months. On the surface, maybe that is good. But the unemployment rate is based on the household survey which had a loss of 87k this month, which is “better” than last month’s loss of 507k jobs. The 4 month total number of jobs in the household survey is month than 600,000 lost jobs! The unemployment rate is only lower because the participation rate has dropped from 61.8% to 61.4% in two months (let’s not forget, this is occurring with record cap ex on data center/AI build).
Okay, now my “favorite” the birth/death model. I will admit I’m not sure how the seasonally adjusted birth/death model translates into a number of jobs in the establishment survey, but this “model” showed 235k jobs added by new businesses being formed. Maybe companies are being formed to take advantage of the AI/Data Center spend. It is in line with last July’s birth/death adjustment, so maybe it didn’t impact things. But I always struggle when “plugs” or “models” seem to be bigger than the actual numbers.
Honestly, I have no idea if today’s numbers are the aberration or whether it was what was originally reported, but that is the point!
How are we making decisions based on data that seems to be a wild guess (apologies to wild guesses)?
Sure, if there is no way to get better, more accurate, timely data, then we’d have to live with it. We had to live with carrier pigeons at one time.
I find it difficult to believe that a nation that put astronauts on the moon, cannot figure out a better way to calculate data that is so crucial to decision making!
So, yes, Houston, we have a problem, but the bigger problem isn’t today’s numbers, it is that we don’t really know what numbers are correct or not!
On the other hand, my view that we don’t see a hike this year looks better today, than it did a week ago (and that is with no “deal” in Iran, which any deal, will also help).