I was off-desk Friday and missed the reactions to the US NFP release.

All I saw was the feed:

Nonfarm payrolls increased by 467,000 jobs last month

๐Ÿ˜†๐Ÿง  "And the White House were preparing everyone for a big miss due to Omicron, what a bunch of clowns! MegaLOLZ"

Reading up on it over the weekend, it seems the headline really didn't tell the full story. And not just by a little bit. It glossed over a LOT.

Dodgy data's a theme we touched on here ๐Ÿ‘‡

The Confidence Compass
Beware โ€˜data-drivenโ€™ central banks and anyone forecasting the future with a high degree of confidence...

Being completely honest, when I got hold of this report I felt like a complete idiot.

Like most, my usual goal is to reduce it down to Good/Bad (or neutral) outcomes as quickly/clearly as possible.

But I couldn't make sense of it...

Me reading the employment report

Until this hit my inbox... ๐Ÿ‘‡

Omicron and the Labor Market: Understanding the Most Complicated Jobs Report Ever
...requires a technical analysis of the methodological specifics of the BLSโ€™s employment situation report.
It also requires digging deeper into the data in order to analyze COVIDโ€™s impact on the labor market.
Finally, the revisions to prior data demands a reexamination of employment growth throughout 2021.
This likely represents the most complicated jobs report in living memory

Here's the link ๐Ÿ‘‡

Omicron and the Labor Market
Understanding the Most Complicated Jobs Report Ever

A couple of points really stand out. This was the main one:

The household survey looked extremely strong this month, with the employment level rising by 1.2 million and the labor force participation rate increasing by 0.3%.
However, this was an illusion driven by updates to the annual population estimates:
Another quirk in Januaryโ€™s report was revisions to reflect updated population estimates used in the household survey.
Had it not been for those controls, the number of employed Americans would have dropped by 272,000, according to the Labor Department.
By the same token, the participation rateโ€”the share of the population that is working or looking for workโ€”would have been unchanged from December, rather than the registered 0.3 percentage point increase.
The US actually saw a 272,000 decrease in employment levels that was hidden by the updated population data.

Sooo, 467,000 jobs weren't REALLY added...

Then there were seasonal adjustments to factor in. ๐Ÿ‘‡

There are two other important things to note about the establishment survey.
First, changes to the seasonal adjustment calculations essentially reduced the summer job gains and increased winter job gains by an offsetting amount.
Second, the benchmark revisions significantly changed the composition of employment levels by industry.
For example, the benchmark revision lowered aggregate leisure and hospitality payrolls by approximately 600,000 while smoothing out the growth rate through the updated seasonal adjustment.
This leaves leisure and hospitality as the major laggard in the labor market recovery, with a shortfall of 1.7 million jobs compared to the pre-pandemic level.

That's some revision!

It's a complete mess to be honest. The lesson?

Tread carefully when interpreting the data. There's a lot going on under the surface.

And it's all happening at a time when many market assumptions about inflation, sovereign bond yields, growth & policy are being severely tested...

A smooth ride into a 'Goldilocks' outcome looks pretty unlikely. No signs that this rollercoaster ride is going to end any time soon!

The data's not your friend. It can't be trusted or taken at face value...

Highly recommend signing up to Joey's substack here ๐Ÿ‘‡

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