The August employment report initially created quite a stir. More than a few observers of the economic scene thought the recession clouds were finally gathering. But a month later, the government revised its estimate of nonfarm payroll numbers up and the world suddenly looked brighter. One can only guess at how the Fed will react at the October 31 FOMC meeting.
For some thoughts on where the economy’s headed, and where it’s been, today we turn to Robert Dieli, president and founder of RDLB, Inc., an economic research and management consulting firm in Lombard, Illinois that publishes its reports for subscribers at NoSpinForecast.com. Bob’s a valuable source for this reporter, and a fresh visit with him is timely, given all the questions swirling about on matters of macro relevance. What follows is his take on the current economic climate, a view written by Dieli–exclusively for The Capital Spectator. As a preview, he doesn’t think a recession’s imminent. For the details, read on…
When the August employment figures were first released, we wrote to our subscribers that they should not take the number too seriously. Our first reason for saying that was because close inspection of the August jobs report showed that most of the decline was due to a drop in state and local education employment. That suggested that something was out of its normal seasonal pattern, or that there had been an incomplete response to the employment survey. In any case, the revision in the jobs report for September, which showed employment growth for August and September, confirmed our suspicion.
Our second reason is seen in the chart below. Note that significant revisions are common between the first and second editions of the employment report. It is on those grounds that we publish this chart in our analysis of the jobs figures every month.
Click for full-size chart
The chart above also shows that in September 2006, the initial estimate was quite small, suggesting some weakness might be developing. That impression was dispelled with the revisions. As a general rule, it’s best to wait for the second report before trying to draw conclusions. But, in the overheated atmosphere that prevailed in early September 2007, it was easy to get sucked in by the headline.