Friday, April 6, 2012

"Jobs growth didn't slow down in March"

A rather provocative headline for a straightforward analysis from Calafia Beach Pundit:

Did private non farm employment grow in March by only 121K (per the establishment survey), or by a very impressive 318K (per the household survey)? Take your pick: no one really knows which one is right, even though they paint dramatically different pictures of how strong the economy currently is.

In the 30+ years during which I have been following these two monthly surveys, there have been many times when they have diverged. Over time they tell the same story, but over shorter periods of a few months or even a few years, they can tell different stories. One shorthand way of resolving the problem of a divergence is to simply split the difference, since the truth is likely to be somewhere in the middle. Doing that for March gives you a private sector payroll gain of 225K, which is right around where expectations were, and which is also consistent with what we've seen in the past few months. I don't see any reason to think that the unexpected slowdown in jobs growth that surfaced in the establishment number reflects any actual slowdown in the economy; the economy never turns on a dime without there being a number of indicators suggesting that something big is going on....MORE
I'm getting a "Wilderness of mirrors" feeling about the market.
The term was developed into a theory by the CIA's James Jesus Angleton to describe a situation where nothing is as it seems. He lifted it from T.S. Elliot's 1920 poem Gerontion:

...These with a thousand small deliberations
Protract the profit of their chilled delirium,
Excite the membrane, when the sense has cooled,
With pungent sauces, multiply variety
In a wilderness of mirrors. What will the spider do,        65
Suspend its operations, will the weevil
Delay? De Bailhache, Fresca, Mrs. Cammel, whirled
Beyond the circuit of the shuddering Bear
In fractured atoms. Gull against the wind, in the windy straits
Of Belle Isle, or running on the Horn,        70
White feathers in the snow, the Gulf claims,
And an old man driven by the Trades
To a a sleepy corner.
                    Tenants of the house,
Thoughts of a dry brain in a dry season.        75