A Summary of My Post-Employment Tweets

By: Michael Ashton | Fri, Oct 5, 2012
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Here is a summary of my post-Employment tweets (@inflation_guy on Twitter):

The Employment report was good, but not terrific. Any way you slice it, 114k new jobs isn't going to get anyone dancing in the streets, even with revisions. A quick word to the conspiracy theorists out there: if I was going to manipulate this number, I would do a better job. By monkeying with seasonal adjustments and secondary assumptions, you could produce a much better "new jobs" number. It would require a whole lot of people to be "in on it," so you might as well get some value out of it, if you're that kind of sleazebag. So I don't think there's any manipulation here, just bad seasonal adjustment.

But more importantly, it isn't the number that affects the election. People think that because the unemployment rate and the re-election success of the incumbent are related, the former causes the latter. It's not so. It's that both are related to a third factor, the actual condition of the labor market. Remember that these are experiments, imperfect estimates of real world conditions. As it turns out, individuals are really good at assessing the state of the job market without any help from the statisticians - they just look at how many of their pals are out of work. So even if this was a completely made up number (or, more likely, just a fortuitous wiggle in the Obama direction), it wouldn't affect the polls. Thought experiment: if the BLS today had reported 4% unemployment, what would the effect on the election be? The correct answer is zero, because everyone would know that's not the real unemployment rate.

It's the same thing here. If the unemployment rate really dropped 0.3% in one month, then it will affect the polls. If it didn't, it won't.

Judging from the total of the various employment and activity series we have, I think we have an economy that is still growing slowly, but decelerating and risking a relapse into recession. But we're not there yet.

 


 

Michael Ashton

Author: Michael Ashton

Michael Ashton, CFA
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Michael Ashton

Michael Ashton is Managing Principal at Enduring Investments LLC, a specialty consulting and investment management boutique that offers focused inflation-market expertise. He may be contacted through that site. He is on Twitter at @inflation_guy

Prior to founding Enduring Investments, Mr. Ashton worked as a trader, strategist, and salesman during a 20-year Wall Street career that included tours of duty at Deutsche Bank, Bankers Trust, Barclays Capital, and J.P. Morgan.

Since 2003 he has played an integral role in developing the U.S. inflation derivatives markets and is widely viewed as a premier subject matter expert on inflation products and inflation trading. While at Barclays, he traded the first interbank U.S. CPI swaps. He was primarily responsible for the creation of the CPI Futures contract that the Chicago Mercantile Exchange listed in February 2004 and was the lead market maker for that contract. Mr. Ashton has written extensively about the use of inflation-indexed products for hedging real exposures, including papers and book chapters on "Inflation and Commodities," "The Real-Feel Inflation Rate," "Hedging Post-Retirement Medical Liabilities," and "Liability-Driven Investment For Individuals." He frequently speaks in front of professional and retail audiences, both large and small. He runs the Inflation-Indexed Investing Association.

For many years, Mr. Ashton has written frequent market commentary, sometimes for client distribution and more recently for wider public dissemination. Mr. Ashton received a Bachelor of Arts degree in Economics from Trinity University in 1990 and was awarded his CFA charter in 2001.

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