Focus on Data, Not Spin

Post from First Trust Economics Blog

Brian S. Wesbury – Chief Economist
Robert Stein, CFA – Deputy Chief Economist 

Oct 11th, 2021

In 2009, after overly strict mark-to-market accounting

rules were altered, we said the Financial Crisis was over. It

was hard to get our voice heard, though, because both sides of

the political aisle were busy saying the economy stunk.

Political liberals tried to use the crisis to grow the government

and increase bank regulation. Political conservatives said it

was a “sugar high” and that President Obama was going to

cause a Depression. It was all spin, all the time.

That’s what it seemed like last Friday, when the

September jobs report was spun into terrible news.

Yes, nonfarm payrolls rose an underwhelming 194,000

in September, well below the consensus expected 500,000.

Meanwhile, the labor force (the number of people working or

looking for work), declined 183,000. Some liberals seized on

these figures to say (1) the expiration of bonus unemployment

benefits didn’t boost jobs like free-market supporters claimed,

(2) women are hesitant to get jobs because of COVID and kids

at home, and (3) the economy needs more stimulus.

But the jobs report only captured the first couple weeks

of expired benefits, and, as a result, it’s too early to tell the

real impact of the expiration. Many recipients may have piled

up enough savings to be patient in re-entering the labor force.

Meanwhile, vaccines, perhaps boosters, and waning COVID

case counts should help more sectors return to normal. And

if the amount of stimulus applied to the economy already

hasn’t worked, what makes anyone confident even more

stimulus would work? Wouldn’t it call for a different strategy


The bottom line is that the employment report really

wasn’t that bad. It wasn’t great, but it wasn’t awful, either.

Payrolls were revised up a combined 169,000 for prior

months. Much of the weakness in September itself was due to

public school jobs that are still not back to normal due to

COVID. The civilian employment measure of job creation

was up a healthy 526,000. And, most importantly, the number

of hours worked rose 0.8% in September, the equivalent of

more than one million jobs. In addition, wages per hour rose

another 0.6%.

At this point, we expect a much stronger employment

report for October. Supply chain problems, vaccine mandates

at private companies, kids not being back in school…all of

this…mean a more volatile economic environment, but easy

money from the Fed and less fear of COVID are continuing to

boost economic activity. Yes, some disappointing numbers,

but the economy has not ground to a halt.

Right now, third quarter real GDP growth looks like it’s

coming in soft – at around a 2.0% annual rate, maybe below

– and that report arrives just six days before the next Fed

announcement. But we also expect both faster job growth and

real GDP growth in the fourth quarter. As a result, Jerome

Powell is likely to follow through on his intention to start

tapering in November. This may cost him his job, but even if

the Fed does taper it will still be easy.

As it’s happened in the past, economic reports have

become a political football, with each side trying to use the

data to score points for their side, greasing the wheel of

politics to try to get policy or elections moving in their

preferred direction. What’s important for investors is to focus

on the data and underlying economic forces, not the narrative

driven by politics.