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Revisionist History
Job creation across the US economy slowed to a relative crawl over the last three months, hotly-anti
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“Official” economic data was always associated with smaller grains of salt depending but now it’s a cube (CPI, etc). Or a brick lol
To say that the powers that be want to massage (distort) numbers to alter perception is an understatement. But what do I know, I’m just a caveman!
Advocates for immigration crackdowns and mass deportations like to argue that they will raise US wages. They were right!
…at least unti/unless the combined effects of tariffs and decimation of industries dependent on immigrant labor cause a deep enough recession and unemployment levels that wages decline…
What comes to my mind is H’s comment that the recent jump to full allocations in vol-control positioning ” …looks more like a trampoline”. I don’t think anyone has been positioned for discovering that the 3-month moving average of your macro narrative was simply wrong. BLS may have just kicked away the trampoline.
If I pattern-match on market stereotypes, this looks like the sort of catalyst media will use to explain a seasonal correction a month or two from now. We’ll see; I suppose it depends on whether this revisionism spreads to outlooks.
Revised May and June NFP is now more consistent with other more dour labor market data. Might expect July NFP to be revised down as well. Are we starting to see hard data and soft data converge? Vibecession 1H25 become precession 2H25 then recession 2026?
Wait a minute – I am reading that excluding healthcare, L3M payrolls are -53K, -45K, and flat [to be revised -ve] . . . my my, this is a dour report.
Wow. Thanks for that nugget, JL.
Meanwhile I notice that volatility is creeping back up today, though when it comes to our friends the robo-traders, one flower does not make spring.
As of yesterday, 67% by name/70% by market cap of the SP500 has reported. 80%/91% beat consensus rev, 83%/94% beat cons EPS. 61%/81% saw cons 3Q rev go up, 45%/64% saw cons 3Q EPS go up. Average price reaction to earnings was -0.1%/+0.3%.
By sector: in Technology, 88%/99% saw 3Q cons rev go up, 76%/95% saw 3Q cons EPS up (MSFT). In CommSrvc, 83%/99% and 42%/83% (think GOOG META). The equal-wt/cap-wt difference is starkest in ConsDisc, 57%/88% and 30%/58% (think AMZN). Bringing up the rear were Materials, ConsStpl.
Comparing rev revisions to EPS revisions: almost every sector has higher % 3Q rev increase than 3Q EPS increase, and that applies up cap and down cap as shown from by name and by cap %.
In general, up cap did better than down cap (compare by name %s to by cap %s) and especially so in CommSrvc, Cons Disc. However, down cap did better in Health Care, Materials.
Overall and so far, I still see emerging margin pressure, large cap fundamentally outperforming, and an earnings season neither good nor bad enough to affect the market outlook (today’s whack is macro and Donald’s tariffs, in my view).
Even here where Walt can be very tough on optimism, we are way too soft on Trump. He lies when it is convenient – and that is often. A weird aside: The last time NFP was negative, your chart points out was in November 2020 when Trump.1 was President. Looking forward, I would not be surprised to find the most secent number – yesterday – restated to be below zero. And August is, odds on, below zero. Every time, before anyone writes on him, remember that Trump went bankrupt 6 times.
It’s hard to describe just how bad the July jobs report is.
Start with the 73,000 increase in new jobs. It’s bad enough as it is, but all of the new jobs came from just one industry: healthcare. Healthcare accounted for more than half of all the new jobs created this year.
To put it another way, hardly any other industries are hiring.
Now look at June and May. The labor market didn’t look so bad based on previously reported increases of 147,000 and 144,000 new jobs in those two months. Those figures were whittled away under the latest revisions. June now shows an increase of only 14,000 jobs and the gain in May was just 19,000.
Wow. These unusually large revisions definitely call into question how the Labor Department got its initial estimates so wrong.
The only reason the unemployment rate hasn’t risen faster is that more people are dropping out of the labor force.
As the jobs report showed, finding a job has gotten really hard.
Very hard. And that’s not going to change until the trade wars are over.
Even defense/aerospace manufacturing is down?
How is AI and the GIG economy impacting accuracy, even credibility?
My late wife used to work at the Ohio Bureau of Labor calculating these statistics. The error rate is a knowable value. If your throw those people away, as we have done, nothing good will come of it. Most of people in this process work for state agencies anyway, something our class clown doesn’t control. Do we even have a Labor Secretary these days? As to the effect of AI and Gig work, can’t real know that.
People keep forgetting about the participation rate. At 62%, ~38% of able-bodied people of working age have, for whatever reason chosen not to enter the workforce. Those folks represent millions of potentially valuable assets to whom we no longer have access. That does not promote rising growth. Neither does deporting or barring millions of useful workers from offshore. Buying goods from overseas avoids the need for immigration, lowers our economic risk and creates growth. All that good stuff is being shut down.
Looks like we’ll get the revisions to the revisions next month after Trump installs someone to report these numbers in a way that aligns to his belief that the economy is booming. I wonder where the jobs will magically show up in the next report?
If AI succeeds in reducing labor costs and increasing profits of mega-cap companies, then we may have entered a paradigm where unemployment rises and the EPS of mega-cap tech companies also rises. As unemployment rises, the FED will also have to keep interest rates lower which also keeps a bid under longer term assets such as mega-cap tech stocks. And this all supports continued corporate buybacks of stock. Looks like Goldilocks for mega-cap tech stocks which are evolving to become a safe-haven asset and offer sustainable growth as long as the AI bonanza continues for next few years.
H-Man, it truly is a cluster — employment declining and inflation won’t go away and may go higher with the tariffs being the accelerant. So what fire do you fight?