General / Expert Commentary

Should You Trust Jobs Data?

Ken Fisher, founder, Executive Chairman and Co-Chief Investment Officer of Fisher Investments, discusses the importance of monthly labor market data to the US economy and why data revisions from the Bureau of Labor Statistics’ (BLS) are so common. Ken begins by acknowledging employment figures have long been volatile, but that volatility has increased over time in part because businesses have become less cooperative in providing timely employment numbers to the BLS. As a result of late arriving data, Ken says the BLS’ employment figures are subject to revision.

To Ken, most monthly economic readings, including employment data, are just noise. For investors, Ken offers a simple rule of thumb: if it’s a monthly number—whatever it is—you should probably ignore it; it likely won’t be helpful in guiding your decision making either in business or about capital markets.

Transcript

There was a lot of kerfuffle just recently that I'm sure you read about, where the Bureau of Labor Statistics did downward revisions in employment numbers. And there's a lot of kerfuffle as President Trump didn't like that outcome, fired the head of the BLS, put in his own person there and alleges that we'll have more accurate numbers moving forward. That won't be what he didn't like.

The fact of the matter is, the fear for many is the changes in employment on the downside from monthly revisions of the Bureau of Labor Statistics' numbers on employment are an indicator of recession. Let me just calm you down a little on this one, if it's something that you've worried about. In fact, these numbers are inherently volatile. And over decades they've gotten more volatile.

And the reason they've gotten more volatile is because over time, for a whole series of reasons, firms are less and less prone to be cooperative in providing employment numbers. There's no real penalty for them not doing so, and they're often just late in providing numbers because it's not really the highest priority for pretty much any firm anywhere in the world. So therefore they get revised later when later numbers come in. And employment as a whole is volatile and there's no steady, perfect stream in that regard, as is true with an awful lot of other government statistics.

Let me offer you this one simple guide. If it's a monthly number, whatever it is, you should probably ignore it. It would have to be very, very extreme for you to want to pay a lot of attention to a monthly number. And then there'd have to be some causality you could see as to why that number was so extreme. I don't care if it's a monthly inflation number, monthly employment number, any other unemployment number—you name it. And it's mostly just noise. These numbers are not that accurate to begin with.

noise. These numbers are not that accurate to begin with. The fact is, even GDP as a whole, the number that so many people see as the holy grail of how well is the economy doing, is measured way more precisely than measurement actually justifies in the real world. These things are not that precise. Don't get so excited about them. Monthly numbers, even quarterly numbers, are really not the things that you use to guide your decisions, either about business or about capital markets.

Thank you for listening to me. I hope you found this useful. Hi, this is Ken Fisher. Subscribe to the Fisher Investments' YouTube channel, if you like what you've seen. Click the bell to be notified as soon as we publish new videos.

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