Friday’s Nonfarm Payroll: A 50-Year Perspective

jobsDoug Short:¬†Friday’s employment report generated a surge of economic commentaries focused on the unexpectedly low 74K increase in Nonfarm Employment. Forecasters were looking for a number closer to 200K. The blogosphere exploded with a range of opinions, the more dramatic of which spoke of the “huge miss” in new jobs.

In retrospect, I believe Dennis Gartman, founder of the Gartman Letter, offered one of the most intelligent opinions on the topic in his CNBC interview.

Here’s the gist of it from the CNBC website:

Gartman’s comment that the numbers are “pulled from thin air” is a perhaps bit hyperbolic, but a look at the data over the past 50 years confirms his view that the month-over-month change at any point in time is meaningless. Here is a 50-year chart of the monthly percent change in this highly regarded economic indicator. I’ve included a 12-month moving average overlay.

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As is readily apparent, the monthly volatility of this indicator is quite extreme. The average monthly change over the timeframe in the chart is 21.6%. If you study the chart closely (click the chart for a larger version), you’ll see many monthly dips far more extreme than the December drop, including many isolated negative months during business cycle advances.

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