“Better than expected.” “Robust.” “A healthy sign.” Comments on Friday’s jobs report are not quite so effervescent as reviews of a new musical, but in the normally staid language of economists and the reporters who cover them, you might say this is positively euphoric.
Here’s how the numbers break out in this week’s statistics, and what Hedgeye has to say about them:
Jobs – At 195,000, new jobs created for the month of June ran ahead of most analysts’ projections. Hedgeye Financials sector head Josh Steiner was looking for a report in this range, so the modest superlatives being tossed around in the financial press don’t apply here. In fact, Steiner says this is a near-ideal number, falling in the growth sweet spot of between 150,000 – 200,000 new jobs, which he considers enough to show that our growth thesis is well on track, but not so much as to spark inflationary fears.
The government also revised upwards the jobs numbers for April and May, which media commentators say bodes well for a stronger economy in the second half of 2013. In other words, the rest of the financial media are slowly coming around to the conclusion Hedgeye reached in the fourth quarter of last year – that a recovery in US growth was on track. The recovery has been slow – as we foresaw – but seems to be winning converts with each new economic datapoint.
Unemployment – Steiner continues to favor Non Seasonally Adjusted (NSA) jobless claims over the Seasonally Adjusted (SA) numbers relied on by both policy makers, and the majority of analysts and economists. Rolling NSA claims improved by 9.6% over last year, bringing what Steiner calls “another week of solid labor market improvement.”
SA claims were basically flat on a rolling 12-month basis – pointing up the discrepancy between what’s going on in the economy, and the way the government chooses to report it. We suspect the policy motivation for this is that using SA statistics tends to dampen the impact of large events, creating the appearance of smooth or gradual changes. If you’re Ben Bernanke, and if you understand this (we think he does, but you never know…) you use statistics to maintain calm in the populace while working up your next policy move.
Remember that, for all we have been critical of his “Helicopter Ben” approach of continuing to print dollars, Bernanke has to balance multiple constituencies. To get anything done at all, he has to keep a lid on Congress, the President, the press, Wall Street, and Main Street. How do you keep so many antagonists at bay at the same time? Well for one thing, it helps to manipulate the data.
This time around, the media were forced to concede that unemployment looked better, even using the flat SA number. Flat unemployment of 7.6% was attributed to more people coming into the workforce – a clear indicator of economic optimism. And the Labor Department reports that pay levels rose “sharply” in June, which means pay rates have outpaced inflation over the last twelve months.