How Accurate Is the Economic Data We Receive (and How Well Is It Analyzed)?

The U.S. jobs report, officially known as the “Employment Situation Summary”, is typically released by the Bureau of Labor Statistics (BLS) on the first Friday of each month. The report provides detailed information on the state of employment in the United States, including data on job growth, unemployment rates, and various other labor market indicators. It's important for financial professionals, investors, and policymakers, as it offers significant insights into the health of the economy. With those facts in mind, there appears to be something wrong with the data that reaches to the public.  With the final release of 2023, you can notice that The Bureau of Labor Statistics quietly erased over 430,000 jobs throughout the year.  Said differently, that means its initial jobs results were inflated by 430,000 positions, and the job market is not as healthy as the government suggests on those Friday releases.  Eleven of the twelve months of 2023, the jobs numbers were revised down after the initial release.

The discrepancy between payroll and household surveys reveals a significant gap in employment data, with implications for the overall health of the job market and economy.  A vast majority of the 2023 job growth was in part time, self-employment, and second jobs.  Second jobs are a classic economic indicator of household budget stress and that country could be in a recession.  More than anything, it makes you question the reliability of the data that reaches markets and that traders and algorithms act on. I am not so naïve to believe a government never lies to its citizenry for political reasons and every administration has done it as long as I have been living.  It is interesting to say the least that when the employment numbers come out the first Friday of every month the market moves immediately on those numbers.  Most investors have no time to dissect it, yet you instantly have a spectacle of commentators on CNBC, Bloomberg, and Fox Business touting the number as great news.  If I am not in a meeting and I can focus on the TV in my office, you will find an odd look on my face trying to make sense of it all.

The bad data we receive brings to mind a few other things I have been concerned on…one of my favorite topics, inflation.  The Consumer Price Index (CPI) and the Chapwood Index are two measures of inflation, but they differ significantly in methodology. The CPI, calculated by the Bureau of Labor Statistics, tracks the price change of a basket of goods and services, representing the “average” urban consumer's spending. It uses a fixed basket and adjusts it periodically, considering consumer spending patterns. In contrast, the Chapwood Index focuses on the cost of living increase in 50 American cities. It measures the price change of the top 500 items on which Americans frequently spend their after-tax dollars, updated biannually. Unlike the CPI, I believe the Chapwood Index argues for a more realistic and higher rate of inflation, claiming it better reflects everyday spending and the actual increase in cost of living. The CPI is often criticized for underestimating inflation due to its variable methodology of what to include or exclude, while the Chapwood Index aims to provide a more accurate and higher inflation rate.  For example, while the CPI might report an annual inflation rate of around 1-3%, the Chapwood Index could report an inflation rate as high as 8-13% for the same period. This stark difference highlights the contrasting methodologies and perspectives on how inflation impacts the cost of living for average Americans.  Here is a link to the Chapwood Index if you ever care to review for yourself.

https://chapwoodindex.com/

I  don’t have more thoughts to add at this time.  I just find it fascinating in these divided political times where you also find divided facts… it seems the different facts contagion is spreading to economics and beyond as well.