NFP: Ignore the noise

There’s no sunshine anywhere in Mudville, except for the handful of fans who, looking for something cheerful to say, revert to citing the Household Survey. (Recall we resolved that red herring years ago).

I find all the post-NFP blather to be almost disturbing in its Candide-like rationales. Why? It reflects a failure to comprehend why investors even track the job market in the first place. Considering that much of the noise comes from professional economists – who should know better – I find this to be disappointing.

Is it just me? Have I become a 44-year old curmudgeon?

The monthly jobs data is too noisy to focus on any one single point; That’s even more true post Katrina/Rita/Wilma. So why concoct all this happy talk?

Further, the Employment Situation is not a Baseball team. Analysts should not be rooting for the home team. They should be dispassionately sifting through the piles of data to provide some broader economic insight. Unfortunately, this kind of analysis is becoming rare.

This doesn’t mean that investors should be ignoring NFP data. But instead of getting whipsawed by the headlines, I want to direct your focus on the longer-term trend, and on the broader employment situation. Consider if you will how this data may impact future spending. Consumer spending is normally ~70% of the economy; given the modest Corporate Capital Expenditures of late, the economy is ever more reliant on consumer spending than normal.

When we take all of the economic data in its totality, the situation is not nearly as robust as the cheerleaders would have you believe: Real Wages are negative, as is the Savings Rate. We know that the prelim Q3 GDP of 3.8% was boosted by Uncle Sam’s profligacy, and via GM and Ford’s giveaways. Neither GM nor the US can be expected to continue at that.

Rant over.

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. camille roy commented on Nov 4

    I heard on the radio this morning that credit card minimums were going up, for most 40 – 100%. Wow, do these people have timing, or what? I mean one the hand, the bankruptcy bill, on the other minimums going up, on the other the rising price of health care, housing, and energy, and last but not least, declining wages & inflation.

    Is this a consumer squeeze, or a consumer crush?

  2. spencer commented on Nov 4

    It looks to me like we are getting two strongly conflicting trends. Consumer spending is weakening,
    but it largely limited to the auto sector where they borrowed sales from the future and we are now in that future.

    We are also seeing a very modest slowdown in high tech capital spending — about what you would expect from the slowing of profits growth.

    But on the other hand the traditional manufacturing economy seems to be accelerating sharply. It had been slowing down, but soon after the storms this area reversed. One place you see it is in the PMI indices — they even show employment strengthening. The other area you see this is industrial commodity prices like scrap steel and copper — both have recently strongly reversed the summer trend of weakness.
    Maybe this just reflects disruptions from the storms. But it could also be the early signs of the impact of rebuilding.

    The hours worked data shows no significant slowing and hourly earnings is moving higher. Maybe the consumer is not as severly impacted by energy as we have been expecting.

  3. nate commented on Nov 4

    thank goodness for Aldi

  4. calmo commented on Nov 4

    That was no rant Barry.
    Back to school for you. Maybe a new set of teeth. Cheerleading practice with the football team. Personal singing lessons with the opera coach. Something.
    Take rantless spencer for example, someone who is taking your shallow bull synopsis seriously. Clearly an absense of Verdi in my humble opinion.

  5. cm commented on Nov 5

    In reference to nate’s comment, Aldi owns Trader Joe’s, for Californians. BTW I’d say Trader Joe’s here has more stuff that appeals to me than Aldi back in Germany. But then there is less local competition for said stuff …

Posted Under