You’re always smarter after the fact – Commerzbank

The US Bureau of Labour Statistics kept us on the edge of our seats yesterday – in the end, it was announced rather belatedly that job creation in the period April 2023 to March 2024 was likely to be 818,000 jobs lower than previously thought. On average, that would be about 68,000 jobs per month. Although there was no Bloomberg consensus for this, the figure is likely to have been on the high end of estimates, Commerzbank’s FX analyst Michael Pfister notes.

Market has a rather muted reaction to the labor data

“Over the past few months, I have discussed several times in this space that the Bloomberg survey seemed to systematically underestimate actual job growth. There was no other explanation for the regular (significant) upward surprises. However, if we now look at the revised figures, the BBG estimate was not so bad. The economists seem to have estimated the underlying trend better than expected.”

“However, if the figures are revised in this way, some market participants may question whether the initial reported figures can be taken at face value. The period now revised was probably an exceptional one. The labour market was only just recovering from the pandemic, while at the same time there was probably increased immigration into the US labour market, which generated more jobs than previously expected. In short, revisions in the coming years are unlikely to be as large.”

“Yesterday’s figures illustrate another fact: a single data release should not lead to a fundamental reassessment. Just because one month’s job creation surprises on the upside or last month’s on the downside, for example, should not change the general view of the world. The data continue to show a robust labour market, but also a visible slowdown for almost a year. Just what the Fed wanted to get inflation under control. And yesterday’s revisions did not change that.”