Headlines in The New York Times, Wall Street Journal and various financial websites this past Friday proclaimed the happy tidings. They read: “Better-than-expected jobs data boasts markets,” and “Recession Concerns Ease on August Jobs Data.” and “Fed May Face Less Pressure to Add Stimulus After Jobs Report,” and the rather more informative headline, “Growth in Jobs Beats Estimates, Easing Concern.”
The jobs report this past Friday was actually terrible. Some 74,000 jobs were lost during August and the overall unemployment rate rose from 9.5 to 9.6 percent. Equally dire from the perspective of those focused on economic reality, was the 67,000 jobs that the private sector created last month (down considerably from the month before), a number totally inadequate if sustained to heal this country’s job angst. The private sector would have to generate about 125,000 new jobs monthly just to accommodate new people coming into the workforce looking for work, and more than 200,000 jobs monthly to start bringing down the unemployment rate.
So why the happiness in markets about this just released jobs report, and why did President Obama hail it as another sign that his own jobs policies are working? Because, as the last headline cited above notes, the 67,000 number “beats estimates.”
The obvious questions then become (or should become), whose estimates did it beat, and what is the real value of beating these expectations?
In answer to these very relevant questions I will quote here a single line from a story on the Bloomberg website. Just reading this line carefully clearly demonstrates how utterly idiotic “beating estimates” is when it comes to assessing economic reality. In a Bloomberg survey taken before the August jobs numbers were released, this poignant sentence notes that: “Projections of 55 economists for private payrolls ranged from a drop of 12,000 to a 120,000 increase.”
That sentence says it all.
It makes clear that what the markets now focus on, what makes our President optimistic about his jobs policies, is a range of guesses so widely spaced, so impossible to view as anything but seat-of-the-pants guesswork, that exactly the same spread could easily have been gotten (and then averaged to come up with a number to be “beaten”) by surveying 55 Jersey Shore lifeguards or 55 San Diego sanitation engineers or 55 of practically any group anywhere you’d care to survey.
Economic common sense. Economic reality. Where hath thou gone?
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