Payrolls: Unhelpful, As Usual

With the Independence Day holiday behind us and a sunny weekend in front of

us, this is going to be a quiet day even by summer-Friday standards. As a result,

the jobs report

which came out this morning is bound to get a large chunk of what little attention

the market is paying to what’s going on. And that’s a pity, since, like most

jobs reports of late, it has increasingly little credibility.

Barry Ritholtz today does a good job of taking

the jobs report apart, saying that a lot of it just doesn’t pass the smell

test, including the 4.5% unemployment rate, the rise in construction employment,

and the boost of 156,000 jobs due to the birth/death adjustment. Calculated

Risk, too, is puzzled.

And, as is increasingly normal on the first Friday of the month, past jobs reports

got revised massively, which should be enough to make traders wonder why they

should take this month’s numbers seriously.

My take on the jobs report is that once upon a time it was useful, but that

nowadays, with a large increase in self-employment and with the margins of error

dwarfing the actual numbers reported, it’s becoming largely irrelevant. The

only useful thing you can do with it is look at it through squinted eyes and

try to discern vague trends: in that respect, one might be able to say that

weakeness in the housing market has not visibly fed through to weakness in the

broader economy, at least as far as employment is concerned. But this report

is far from dispositive: if you think that, contra the report, there actually

is weakness in the US jobs market, you might well be right. With the

quality of statistics we have to work with, there’s simply no way of telling

for sure.

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