Payrolls: An Apology

Why did I pick today to resuscitate my extremely occasional series of blog entries on the uselessness and irrelevance of the payrolls report? In reality, it would seem that the report was responsible for the decimation of technology stocks, the capitulation of the market into the realization that recession is now more likely than not, and generalized fear that inflation is going to prevent the Fed from cutting interest rates aggressively.

Well, you win some, you lose some, I suppose. I could attempt a correlation-is-not-causation post, trying to say that the markets are moving in a random fashion and that any connection to this morning’s payrolls report is entirely coincidental. I could, but that would be rather desperate, and a bit dishonest, to boot.

I don’t think that the report changed a lot of investors’ minds about the future of the economy – but then it didn’t need to: it only needed to change the marginal investor’s mind. And in practice there’s very little difference between stocks dropping rationally in reaction to new information, on the one hand, and a panicked stock-market sell-off precipitated by a worse-than-expected-but-hardly-paradigm-shifting statistical release, on the other.

The fact is that anybody who sold stocks or bought Treasuries when they got the NFP news is smiling this afternoon, and anybody who ignored the report on the grounds of its uselessness and irrelevance is looking rather sheepish right now. So, um, sorry. My bad.

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