Gil’s Musings

When Good News Is Bad


Last Friday’s non-farm jobs report was a blowout. Forecasts estimated that +200,000 jobs were added in January, but the number came in at +517,000. The market seemed to like it, but I don’t. The surprisingly strong job growth tells me that interest rate hikes are not having the desired effect. That’s the part I don’t like. The Fed is looking for economic weakness to indicate they have hit the mark with rate rises. This jobs report could mean that rates must rise further to cause that retrenchment en route to greater price stability and the quelling of inflation. 

In terms of the broader economic recovery, measuring unemployment has some tricky elements, and the government uses those stats to lobby for itself. 

The unemployment rate is the most visible statistic, down to 3.4% per the latest report. However, this rate measures the percentage of unemployed only amongst those in the labor force. Since January 2020, the number of people in the labor force (the employed plus the unemployed) has increased by 1.2 million. However, the number of people not participating at all in the labor force increased by 5.2 million at the same time.

So, the lower unemployment rate allows the claim we keep hearing: “We are experiencing the fullest employment in 50 years.” Yes, but a greater portion of the population is un-productive than during the Trump administration… by a lot. You can always get statistics to say what you want but the devil is in the details.

I’m still hopeful for lower rates by year-end, but the jury is still out. 

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