An unpleasant employment surprise

April 6, 2012
that was unpleasant.

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So that was unpleasant: I guess we’ve all just become so used to healthy jobs report that a weak one like this comes as a nasty shock. And it is a bad report: for all that the margin of error is high, and the unemployment rate (which, remember, is basically the one number which matters politically) fell, the Establishment Survey was riddled through with weakness, both in terms of February’s numbers and in terms of revisions to December and January. Even weekly earnings fell.

So there’s bad news here, which is that judging by this one report, some of the steam might have gone out of the recovery. And there’s a little bit of good news too, which is that it’s just one report, not a trend, and that it has a very wide margin of error; that the economy’s still creating jobs, even if it’s not creating them as fast as we had hoped; and that it wasn’t all that long ago that a +120,000 headline figure would have been taken as something decidedly encouraging. So the expectations baseline has moved significantly upwards, and in many ways it’s the expectations baseline, rather than the numbers themselves, which drives investment.

The markets always care a lot about the non-farm payroll figures, but this report will ultimately have almost no effect on either politics or policy. Politics because the Household Survey showed unemployment falling, and policy because it’s actually pretty much what the Federal Reserve expected. As far as the real-world ramifications of this are concerned, they’re small and mainly related to the fact that long-dated Treasury bonds now yield about 0.1% less than they did yesterday. Which is important if you’re a fixed-income trader, and isn’t if you’re not.

So if you’re taking today off, there’s not a whole lot to worry about here. Go off and enjoy your long weekend. But be sure to go back to work next week!


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