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
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.