Commerzbank economists Bernd Weidensteiner and Christoph Balz highlight that recent US labor market indicators, especially nonfarm payrolls and hours worked, have become unusually volatile and subject to larger revisions. They argue this complicates Federal Reserve assessment of labor conditions and monetary policy timing, suggesting greater reliance on the unemployment rate and broader datasets to identify underlying trends.
Volatility and revisions cloud US jobs picture
“US jobs data has been unusually volatile for several months now, and figures are often revised significantly. This makes it harder to interpret new data, which also poses challenges for the Fed.”
“To make matters worse, the job data appears to have become more prone to revisions, and not just in terms of the annual benchmark revisions. With each new labor market report, the data for the previous two months is revised.”
“Observers have little choice but to rely on longer-term trends. A longer-term average indicates that employment growth has likely stabilized at slightly above zero.”
“From a macroeconomic perspective, the total number of hours worked by all employees is even more important than employment figures. While a significant increase in jobs typically indicates a robustly expanding economy, if employees are working fewer hours on average at the same time, the total volume of work may actually have shrunk.”
“Ultimately, it is more important than ever to take a comprehensive view of all relevant data in order to identify the key trends in the labor market. Given this complexity, the risk of reacting too late with monetary policy has likely increased.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
