Submitted by Pater Tenebrarum – The Acting Man Blog
A Lagging and Imprecise Indicator
As we have pointed out in our most recent update on manufacturing data, last Friday’s payrolls report will eventually be revised out of recognition (in previous months, a number of reports have at first been subject to an upward revision, only to be revised significantly downward again a month later. The final numbers will take still longer to arrive, up to a year if memory serves).
Hammer guy is included the non-farm payrolls report, Ms. Sickle isn’t …
Photo via magic-ays.com
This fact and the fact that employment is a lagging economic indicator makes it extremely odd that it is held to be the most important data point on the radar of the central planners at the Federal Reserve. However, the FOMC’s own statements indicate as much, and this policy focus is after all in line with the Fed’s bizarre mandate, which enjoins it to both keep price inflation low and employment high, by means of manipulating interest rates and the money supply.
Change in non-farm payrolls, monthly – total (black bars) and private sector payrolls (red bars). Last month the government was quite busy hiring – private sector employment actually grew at a slower pace than in the two downwardly revised previous months. Government drones are not creating wealth – they are consuming it – click to enlarge.
This is of course in keeping with the Keynesian philosophy – Keynes’ system can be called a “labor-based macro-economics”, as Roger Garrison points out in Time and Money. Primarily Keynes was concerned with fighting unemployment by means of inflation – i.e., by lowering the real wages of workers by pulling the wool over their eyes. Continue reading