THE LEAST IMPORTANT JOBS REPORT OF ALL TIME
- Joshua M Brown
- May 31st, 2012
I love my friend Joe Weisenthal and I know he's half-kidding with his monthly routine of turning the BLS Non Farm Payrolls report into the Super Bowl - twelve times a year. We've gotten into this habit in the financial web and media of treating each successive BLS Day since the crash as though it's the most important one EVER!
But the truth is, only a few of them, at specific junctures for the market and economy, were all that important. And even then, its always the trend that's mattered more, never the single monthly number.
This particular one is totally meaningless other than for the three-digit Dow rally or sell-off it might produce in the ultra-short term.
For starters, it's meaningless for the usual reasons - 99% of people have no idea what the hell they're even looking at and the pundits are particularly absurd (even more so than usual) in the wake of these reports. I'mma let my man Jeff Miller ride on these fools:
There is a list of repeated monthly mistakes by the assembled jobs punditry:
- Focus on net job creation. This is the most important. The big story is the teeming stew of job gains and losses. It is never mentioned on employment Friday. The US economy creates over 7 million jobs every quarter.
- Failure to recognize sampling error. The payroll number has a confidence interval of +/- 105K jobs. The household survey is +/- 450K jobs. We take small deviations from expectations too seriously -- far too seriously.
- False emphasis on "the internals." Pundits pontificate on various sub-categories of the report, assuming laser-like accuracy. In fact, the sampling error (not to mention revisions and non-sampling error) in these categories is huge.
- Negative spin on the BLS methods. There is a routine monthly question about how many payroll jobs were added by the BLS birth/death adjustment. This is a propaganda war that seems to have ended years ago with a huge bearish spin. For anyone who really wants to know, the BLS methods have been under-estimating new job creation. This was demonstrated in the latest benchmark revisions, which added more jobs, as well as the most recent report from state employment offices.
And then there are the factors unique to this particular report that render it meaningless:
1. US stocks are not trading based on US data anymore. Our testicles and ovaries are currently lying on a butcher's block waiting for the Greek election to send the entire weight of the global monetary system crushing down upon them with great force and biblical violence.
2. The Spanish bank run currently underway, with tens of billions fleeing the country's financial institutions is also going to play a more critical role this summer than anything taking place here in the US on a farm or off a farm.
3. China is almost certainly heading toward technical recession. There's actually not a single mainstream measure of economic activity or credit that says otherwise. Not even one. Have a look at the latest shitshow, official PMI came out minutes ago way below expectations. The ministers there are talking about stimulus while simultaneously looking to hold down prices and clean up the over-building mess. Stimulus and economic constraint do not happen simultaneously ever anywhere on planet earth, you do one or you do the other.
4. The election and the fiscal cliff stuff is in the back of everyone's minds. We all know that no matter who wins the election, taxes are going up in some way, shape or form. And we all know that government spending is going to drop in some way, shape or form. These two developments are inexorable and neither one of them are conducive to GDP growth or labor market amelioration at the outset. I'm sorry.
And so with these four items at the fore, please explain to me how anything in tomorrow's report changes a single thing. How?
The truth is that unless we've somehow magically added 500,000 jobs this month and we see massive upward revisions for March and April, the number itself simply won't matter at all past the first hour or two. Our economy is doing okay, not terribly and not great. And right now, it just doesn't matter, I don't care if Angelina Jolie releases the data, topless and smothered in mayonnaise.
So sleep tight and be up bright and early tomorrow - for the Least Important Jobs Report of All Time!
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.