Does The Monthly Non-Farm Payroll Report Add Value

Monthly Non-Farm Payroll Reports Are Misleading 

The Non-Farm Payroll report for August confirmed that the U.S. economy is weak.

The reported payroll figure for August is 142,000, below expectations of 165,000. Recent history suggests that the payroll figure for August is overstated and will be revised down.

The last 4 monthly revisions have been significant.

The July Non-Farm Payroll number of 114,000 triggered the liquidations that followed in early August. July was revised down from 114,000 to 89,000, and there is still a revision outstanding.

For June, the payroll number was 206,000. That has been revised down to 118,000—almost half.

The June payroll number was initially received as a signal that while the economy was slowing, it remained solid. If the actual figure of 118,000 had been reported, what signal would that have given the market? Would that have triggered a level of financial chaos similar to that witnessed by the market after the July payroll was reported?

More Revisions

Not only was July revised down, but June was also revised down to around the same level.

Even May, which had the strongest payroll number in the series, was revised down. The reported number was initially 272,000, but that has been revised down to 216,000.

The April payroll report was revised down from 175,000 to 108,000.

In short, the payroll numbers over the April to July period have been revised down from 767,000 (monthly average 191,000) to 531,000 (monthly average 132,000).

Revised Non-Farm Payroll Numbers Paint A Different Picture

The revised payroll numbers confirm what the markets are pricing in. Markets can sense that the economy and the labour market are weak.

It should be noted that the Non-Farm Payroll numbers for the period April 2023 to March 2024 were recently revised down by 818,000. That means that actual job growth in the period was 30% less than initially reported.

The level of downward revisions experienced recently raises questions about the Non-Farm Payroll report as a reliable indicator and guide to the economy’s health.

Given its recent track record, it is surprising that the Federal Reserve and the markets place so much emphasis on it.

More concerning is that the monthly Non-Farm Payroll report could influence future policy decisions, particularly those related to interest rates and fiscal stimulus.

Click on the Journal link below to read more about the factors currently driving the economy, the stock market and Bitcoin.

Link: JOURNAL