Finally Some US Data, And It’s Payrolls?

It’s been a while since we’ve had any data on the US economy. With the federal government having been shut down, especially the Census Bureau, the figures have gone dark. The current short-term government reopening will lead to an eventual rush of estimates, perhaps a few series that will be updated two months at a time.

In lieu of all that, the dataset that breaks the silence is the payroll report. Hooray. When we last left it the US economy was booming big, at least according to the BLS headline. The release was a perfect smash, the Establishment Survey coming in at +312k and with flawless timing to help soothe rather dire market sentiment after a traumatic December.

The new data for January 2019, released today, includes the standard annual benchmark update. There wasn’t much change in either direction from the revisions, save December’s number. Just like that it’s gone, vanished. That extremely helpful +312k has been replaced by +222k instead.

The stock market would likely have been bid anyway given its grave misunderstanding of what it is cheering in Powell’s pause, but you never know how +222k could’ve been interpreted rather than +312k. And there are more revision opportunities still ahead.

That’s the point with the payroll report. It is, overall, unreliable even as a coincident indicator. In terms of forward-looking, the data is and has been entirely irrelevant and not just due to revisions and changing benchmarks.

The other part of the series, perhaps the more important part, is the wage data. Average hourly earnings had crept up over the last half of 2018. Economists tried to claim this was the long-awaited repercussion of the LABOR SHORTAGE!!! therefore proof the economy really was booming.

Only, the rate of change (gamma, the only thing that matters) was nothing like a tight labor market. Benchmark revisions here actually show that wage acceleration was lumpier and less determined than previously thought. The average hourly rate has been going up, but not in a straight line and with a gentler slope.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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