Friday's Jobs Report: Economists Happy, Markets Not - So What About the Fed?
What did Friday's jobs report tell us? It depends on whether you're an economist, an investor, or a Fed governor.
The economists who receive attention from major media pretty much echoed their long-held view that the economy continues to improve; things are getting better; any "slack" in the job market grows ever tighter. Among their favorite comments: We continue to "replenish" the jobs lost during the 2008-2009 crisis. Yes, we realize it's been seven long years. And no, we haven't quite replenished all the lost jobs...but we're getting there. As for the 140,000 people who "left" the job market (retired, stopped looking for a job, or simply haven't found one despite their months and months of looking), the percentage of Americans not employed has risen to levels last seen in 1977. But out of sight, out of mind, right?
Investors weren't so sanguine. The stock market gurgled and slumped. But as the drop approached 150 points down on the Dow, a miraculous buy order entered the market, stopping the nerve-racking decline. Yes kids, it's likely the government "Plunge Protection Team" come to the rescue, and not a moment too soon. As it is the averages are either in the red or flirting with the red zone for the year - all except the might NASDAQ which remains the year's star, although one that's losing its luster. We suspect investors may have refuse to be dazzled by the polish the economists continue to rub over the surface of a continuing weak economy; or maybe it was the report by the Wall Street Journals' Jon Hilsenrath that these numbers will bolster the Fed's raising rates as early as September.
OK, so different interpretations of the same data shouldn't surprise us. Rarely does a diverse group of observers. agree 100%, whether it's the economy, the markets, the weather, or whether the New Giants will field a respectable defense this year. And yet, we may want to remember this simple fact, even as we all obsess on data related to employment: Employment is a lagging indicator.
Yes, that number that attracts such attention each time it's released tells us nothing about the future. In fact, as a lagging indicator, it doesn't even tell us anything about the present. It simply tells us about what happened at some point in the past.
Which does explain why, despite the wrinkled puzzled brows of economists, investors don't buy and sell based on the employment numbers. Even if the employment numbers were absolutely positive, an investor won't (or shouldn't) necessarily be swayed by something that's already old news just because it's being reported as new news.
But the Fed remains a curious case. If employment only speaks of the past, why do they use such numbers to bolster their case for raising rates - something that will surely effect the future? For this, you'd have to ask Ms. Yellen or any of her colleagues on the Federal Reserve Board. They seem to have this all worked out. They know what they're doing, don't they?
The economists who receive attention from major media pretty much echoed their long-held view that the economy continues to improve; things are getting better; any "slack" in the job market grows ever tighter. Among their favorite comments: We continue to "replenish" the jobs lost during the 2008-2009 crisis. Yes, we realize it's been seven long years. And no, we haven't quite replenished all the lost jobs...but we're getting there. As for the 140,000 people who "left" the job market (retired, stopped looking for a job, or simply haven't found one despite their months and months of looking), the percentage of Americans not employed has risen to levels last seen in 1977. But out of sight, out of mind, right?
Investors weren't so sanguine. The stock market gurgled and slumped. But as the drop approached 150 points down on the Dow, a miraculous buy order entered the market, stopping the nerve-racking decline. Yes kids, it's likely the government "Plunge Protection Team" come to the rescue, and not a moment too soon. As it is the averages are either in the red or flirting with the red zone for the year - all except the might NASDAQ which remains the year's star, although one that's losing its luster. We suspect investors may have refuse to be dazzled by the polish the economists continue to rub over the surface of a continuing weak economy; or maybe it was the report by the Wall Street Journals' Jon Hilsenrath that these numbers will bolster the Fed's raising rates as early as September.
This keeps the central bank on track to raise short-term interest rates this year, possibly in September, as some officials have recently signaled.Remember, of course, that those ever elusive wage increases continue on track - to nowhere, as we pointed out last week. No matter, the numbers tell us that "slack in the labor market has declined and will eventually lead to an acceleration in wage and price gains." How long have we been hearing this? Well, never mind. And don't shoot Hilsenrath. He's just the messenger.
In speeches and official statements, Fed officials have described hiring as solid and have said the unemployment rate is evidence that slack in the labor market has declined and will eventually lead to an acceleration in wage and price gains.
The employment report released Friday, which was in line with market expectations and with the trend of recent months, likely won’t change those assessments.
OK, so different interpretations of the same data shouldn't surprise us. Rarely does a diverse group of observers. agree 100%, whether it's the economy, the markets, the weather, or whether the New Giants will field a respectable defense this year. And yet, we may want to remember this simple fact, even as we all obsess on data related to employment: Employment is a lagging indicator.
Yes, that number that attracts such attention each time it's released tells us nothing about the future. In fact, as a lagging indicator, it doesn't even tell us anything about the present. It simply tells us about what happened at some point in the past.
Which does explain why, despite the wrinkled puzzled brows of economists, investors don't buy and sell based on the employment numbers. Even if the employment numbers were absolutely positive, an investor won't (or shouldn't) necessarily be swayed by something that's already old news just because it's being reported as new news.
But the Fed remains a curious case. If employment only speaks of the past, why do they use such numbers to bolster their case for raising rates - something that will surely effect the future? For this, you'd have to ask Ms. Yellen or any of her colleagues on the Federal Reserve Board. They seem to have this all worked out. They know what they're doing, don't they?
Comments