Jobs Report
The conventional wisdom is that the economy will slow and that will hurt employment. Last week's jobs report seems to confirm this, showing that payrolls increased less than expected. Nowhere in the mainstream economic reportage that I have read did anyone entertain the notion that maybe the economy is slowing because employment is slowing. With official unemployment at 4.6% it is logical to think that the remaining pool of available workers quite possibly are not the sharpest tools in the shed. Also, wages are rising. So faced with either not-so-attractive job candidates or having to pay more (or both), it is not surprising that employers are doing less employing. All else being equal (meaning ignore productivity for now), less hiring means less work means less output means slowing profit growth means lower stock prices. But where folks make the logical leap that might find them eventually in the chasm, is that US employment is not synonomous with US public corporation profitability. Companies can get around the higher pay/unappealling labor pool problem by doing things in other, non-US type places and hiring the people who live in those places. So slowing US economic growth does not necessaily mean slowing profits and thus trouble for the US stock market, albeit the conventional view, dominating the mainstream business and financial media, is that this is exactly the case. It could be, but it doesn't have to be. Corporate profitablility could continue in the face of slowing US economic growth. That it will, and that it will benefit stocks, is the contrarian opinion today.
On another note, last week's payroll report added some fun quasi-controversy into the use and interpretation of this data. As most people who pay attention to the payroll employment numbers know, they are not the only employment numbers. There is the household survey as well. The difference between the two and the relative importance of each is an ongoing source of debate, which was highly visible during the last presidential election. Now we have a competitive source of data, the ADP Report, which in theory should be highly credible. Nonetheless, for this last period the ADP Report "missed by a mile" and now economists and markets are wondering how or if to view its contribution to the employment picture. This is worth watching.
On another note, last week's payroll report added some fun quasi-controversy into the use and interpretation of this data. As most people who pay attention to the payroll employment numbers know, they are not the only employment numbers. There is the household survey as well. The difference between the two and the relative importance of each is an ongoing source of debate, which was highly visible during the last presidential election. Now we have a competitive source of data, the ADP Report, which in theory should be highly credible. Nonetheless, for this last period the ADP Report "missed by a mile" and now economists and markets are wondering how or if to view its contribution to the employment picture. This is worth watching.
posted by Donny Baseball at 10:50 AM
2 Comments:
Is the payroll data forward, or backward looking? What is the track record of forecasting future economic activities using last month's payroll data?
The payroll data is mostly backward looking but can be slightly forward looking in that it counts jobs created not necessarily people in those jobs, so it can have jobs that are yet to be filled.
I am not well-positioned to comment on the forecasting value of the payroll data as I son't make my living doing economic forecasting, but I will say that I have a general sense that a 4 month rolling average of payroll data would be a good indicator of near term future economic output.
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