As it currently stands in the headline BLS figures, the Establishment Survey greatly rebounded to + 287k from a downward revised +11k in May. There is this month, just as last month, too much emphasis on the monthly payroll figure as it is more often than not noise. We can only hope the drastic extremes of the past two months may have finally injected a more cautious approach to what has always been a statistical process.
Two payroll reports ago, one that was taken as “ugly”, I wrote:
There is very little value to begin with in trying to parse monthly variation, reflected in a wide confidence interval at just 90% confidence. For all we know the jobs market in April 2016 was exactly the same growth as March 2016 when everyone was far more pleased. What we really don’t know is whether both March and April should have everyone elated or seriously worried (obviously, the rest of the economic data points uniformly point to the latter).
That seems to be the overall message even for a blowout topline figure like +287k; it might be good but in reality there is just as good a chance payrolls in June were no different than May as both may have been somewhere in the middle. Even with that huge gain, the overall trend is still slowing. The 6-month average in June was just +172k, barely changed from +169k in May because the +287k for June replaced +271k from December as it dropped from the 6-month period. That isn’t just significant for the arithmetic of moving averages, it is significant in terms of orientation and determining significance.
In other words, the BLS estimates now that payroll gains in December 2015 ended a 3-month run where the increase in each was above +270k. For three months straight to end last year, the Establishment Survey suggests even more robust conditions than just the one month in June 2016 – and that all amounted to nothing. In the context of the wider economy, the major payroll reports seem to be generating much more noise than meaningful signal.
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