You’re always smarter after the fact – Commerzbank

The US Bureau of Labor Statistics kept us on the edge of our seats yesterday – after all, it was announced rather late that job creation from April 2023 to March 2024 was likely to be 818,000 more jobs smaller than previously thought. On average, that would be about 68,000 jobs per month. While there was no Bloomberg consensus on this, the figure was likely to be on the higher end of estimates, notes Michael Pfister, FX analyst at Commerzbank.

The market has a rather weak reaction to the labor force data

“We have discussed several times in this space in recent months that the Bloomberg survey appeared to systematically underestimate real job growth. There was no other explanation for the usual (significant) surprises in growth. However, if we now look at the revised numbers, BBG’s estimate was not so bad. Economists appear 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 initially reported figures can be taken at face value. The period now reviewed was probably an exceptional one. The labor market has just recovered from the pandemic, while at the same time there has likely been increased immigration into the US labor market, generating 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, for example, job creation one month surprises on the upside or last month on the downside, for example, shouldn’t change the overall worldview. The data continues to show a robust labor market, but also a noticeable slowdown for nearly a year. Exactly what the Fed wanted to keep inflation under control. And yesterday’s revisions didn’t change that.”