Government Economic Data?
Any attempt by investors to strategize based on government data should consider that virtually all announced monthly statistics are subject to almost endless revisions, some of which may be substantial. It is also clear that the media will precede actual announcements with a seemingly endless and widely diverse array of projections, followed by a minute parsing of even the smallest change.
In addition, data collection, on which the announced statistics are based, may not have kept up with changes in technology and key characteristics of the workforce. (Political pollsters are having difficulties with the pervasive shift from land lines to mobile phones.) Consider unemployment data. Currently, unemployment is being reported at just over 5%. This would be consistent with “full employment”, which is difficult to define but is often considered to be in the general area of 4-6%.
If the economy is at, or near “full employment”, we should be seeing upward pressure on wages, but we haven’t yet. Moreover, workforce participation is unusually low, at less than 63%. Yes, there are significant shortages of labor in certain skilled classifications, but overall, joblessness remains a problem.
If this isn’t enough contradiction in the data, consider the rise in freelancing (think Uber). According to a study, partly commissioned by the Freelancers Union, there are now more than 50 million freelance workers nationwide, approximately 20% of the workforce. How are these individuals accounted for in employment statistics?
Investors would probably be well served by remembering that most government statistics which are subject to revision and media frenzies over relatively small changes may not be particularly helpful. An old French saying, “the more things change the more they stay the same” may be applicable. In short, stick with your long term plan and make changes only after a thoughtful review of material new information.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®
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