Due to an ongoing government shutdown, the U.S. Bureau of Labour Statistics — considered a “non-essential” agency by the White House — will not be releasing the monthly nonfarm payrolls report on Friday.
Here are four reasons why we’re better off without it anyways:
- The jobs report lacks timely information. In a recent report — titled “Payrolls, Shmayrolls” — Goldman Sachs chief economist Jan Hatzius explains why: “It is difficult to overemphasize the importance of using first-release data for the explanatory variables in our analysis … payrolls and GDP are subject to heavy revisions between the first release and the fully revised version. Some of these revisions occur in the next monthly or quarterly release, and some occur with much longer lags via the annual revisions.”
- The numbers aren’t even accurate, thanks to seasonal adjustment errors. Matthew O’Brien reports in The Atlantic on a new study by economist Jonathan Wright: “Just how bad are the data? Well, keep in mind that the jobs report’s margin of error is supposed to be about 90,000. But these post-crisis seasonal errors have almost doubled it to about 170,000. That’s right: the jobs report’s real margin of error has been about as big as the average jobs report itself the past few years.”
- Those inaccurate payroll numbers may be leading the Federal Reserve down an inappropriate course for monetary policy. Matthew C. Klein explains in a Bloomberg View column: “The big takeaway is job growth since the trough has been steady and slow. This has some surprising implications for Fed policy. It isn’t in Wright’s paper, but during the conference he presented another slide showing his chart of seasonal distortions with the start and stop dates of the Fed’s asset purchase programs added on top. It turns out that the Fed stops buying assets after a few months of good job data only to restart buying once job growth slows, even though a proper measure of employment would show no acceleration or deceleration in job growth. In other words, the Fed has been reacting to meaningless data.”
- Information of the kind presented in the jobs report doesn’t lead to better investment decisions, either. ConvergEx Group chief market strategist Nick Colas examines this idea in his daily note to clients: “Now, at some point in the relatively near future, the U.S. Federal government will get back up and running, and the Federal Reserve and investors will have their customary information flow returned to them. The lessons presented here are, however, still relevant. More information does not lead to better decisions. Those personality types who like to think in broad strokes are especially susceptible to feeling overwhelmed by incremental data. Is there any organisation more macro-focused than the Federal Reserve? Probably not. But you don’t have to fall into the same trap. Less is really more.”
On the off chance that the “non-essential” government agencies are re-opened before Friday, the nonfarm payrolls report is scheduled to be released at 8:30 AM ET.
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