Does The Government Manipulate Economic Data?

The conspiracy theorists are out in full force. On Friday the government announced that the economy created 254,000 new jobs, far outpacing the 150,000 that was expected. Since it was the last employment report until the election, plenty of folks are crying foul and manipulation. However, just a few short months ago, we learned that the government revised the prior year lower by almost 1,000,000 jobs which had been overstated.

Here’s my take. I do not believe the government screws around with the data. It’s a great story to sell, but the data don’t support the claim. I just think the government is not very good at collecting the data and it has gotten worse over time, but especially since COVID. When you look at how they do the dirty work, it’s clear to me that it’s hugely prone to error.

One example is the “birth/death” model which estimates new and closed businesses each month. Coming out of recession, the monthly jobs numbers look weak and usually revised upwards. During long expansions, the monthly jobs numbers look stronger and are often revised lower which is what we have seen for the past year or so.

Again, I do not believe anything nefarious is going on. The “birth/death” model isn’t very accurate early and late in the cycle. That’s my take.

Other good news in the report included unemployment falling to 4.1% and wages going up by 4% over the past year. This was not a report that signaled imminent recession.

I was a little surprised at how strongly stocks opened up, then fell hard and then rallied again. Have a look below at the day broken up into 5 minute bars.

Last week was a seasonally strong week and markets fell mildly. The stock market remains on solid footing. However, that doesn’t preclude a routine and healthy mid-digit pullback at any time. The stock market indices look like they all want to move higher into year-end, regardless of what happens this month. Since September 2022 my strategy has been to buy weakness. That remains in place today. I sometimes try to be too cute. Don’t miss out on what could be another solid quarter.

On Wednesday we bought more CHWY. We sold SSO. On Thursday we bought SSO. We sold RYOIX and PCY. On Friday we sold EMB and SSO.