Trying to watch the economy with any extensive life experience is curious, but perhaps it shouldn’t be.
A well-known political and economic commentator discussed this week’s report on the June jobs market in a video. A quick refresher: the June Employment Situation report stated nonfarm payroll employment was up 57,000. The Dow Jones survey of economists showed a median prediction of 115,000. Reality, about 49.6%, was less than half of expectations.
Then there were revisions. April’s 179,000 jobs were marked down by 31,000 to 148,000. May was reduced by 43,000, from 172,000 to 129,000. Together, the two months were 74,000 lower than previous reports. There is also no telling whether the July report will change the May number. (As the Bureau of Labor Statistics noted, “Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.”
The commentator said that the “blockbuster” Spring hiring many, including, with a nod to good transparency, the pundit included themselves, broadly discussed just weeks ago, “was kind of a mirage.”
Of course it was. You don’t know what the outcome of a storm will be when you’re in the middle of it. Good economists, engineers, scientists, mechanics, farmers, performers, cooks, and anyone with strong experience in any field know this. Events can be chaotic. Actions and data rarely move in a simple, direct line.
Many craftspeople and artists know this intimately. Things don’t go predictably or always favorably. Much of the skill comes in learning how to mitigate problems that happen along the way.
In fact, to some degree, everyone knows this. If you’re driving in bad weather, you look for the potential of skidding. Any job has good and bad days. You’re planning for retirement, and suddenly there’s a medical emergency that throws out your immediate plans.
How can anyone deeply involved in economics, finance, public policy, or punditry assume that two months of data mean a dependable trend?
On July 1, Donald Trump opted against a 16-year USMCA trade agreement renewal. Instead, there will be months of negotiation every year for the coming decade — a supercharged disruption that could leave tariffs and trade in a more fundamental quagmire than the 2025 tariff storms after that infamous “Liberation Day.” And this only a couple of weeks after the Federal Reserve, under new Chair Kevin Warsh, turned everything upside down about how they would look at data and report.
One day, experts frequently cite private credit as a new financial wave to make everyone rich. Then comes the backlash when investors get deeply worried that “the industry expanded too quickly and extended loans to companies that won’t be able to pay them back,” as Rob Copeland at The New York Times reported.
Forbes Senior Contributor Mayra Rodriguez Valladares wrote in 2019 how high-leveraged zombie companies could threaten the economy. The next year, former contributor Jack Kelly reported that a venture capitalist and former Facebook executive warned of the danger of propping up the zombies. Given previous concern about zombies only surviving on cheap loans, did anyone ask how much private credit lending has gone to them at decidedly non-cheap rates?
Oil drops in price, but no one knows how long any peace arrangement, and steady opening of the Strait of Hormuz, will last. Let alone how gas and diesel are priced and if they will fall as so many expect or get bounced up.
It comes down to an ancient Chinese parable about the old man who lost his horse. His animal ran off; people felt sorry for him. He cautioned patience. Months later, the horse returned with other horses. People wished him well, good luck. He said maybe. His son rode on a horse and broke his leg. Everyone in the village felt sorry for him. He said maybe good luck would come. A year later, young men were pressed into military service, except he couldn’t.
The present doesn’t necessarily lead from the past. If things turn up for a time, they might turn down harder. Be patient and try to invest and live in a way that could best preserve you from risk. And when leaders and experts are certain of the future, remember how often they have been wrong.
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