![Don't Trust Government Numbers Thumbnail](https://static.twentyoverten.com/5bfd7e349c0397157a3b212b/1PbkeaOEzvo/107-Govt-Numbers.png)
Don't Trust Government Numbers
The announcements of government economic statistics can move markets and affect investor attitudes. But be careful about making short term investment decisions on them.
Subscribe to our Podcast!
Contact Steve here:
https://calendly.com/stevewershing/inquiry
Full Transcript below:
00;00;00;00 - 00;00;33;28
Unknown
Welcome back to 30 Minute Money. Our podcast delivers action oriented smart money ideas and bite sized pieces. I'm Scott Fitzgerald from ROC Vox recording and production. I've got Steve Wershing here in studio once again in downtown. Outside of downtown. Right downtown Bushnell space, downtown, Bushnell's basin. That's where in the burbs? In the burbs. And we're just going to sit here and have a little conversation about the government and trust and numbers.
00;00;34;01 - 00;00;54;23
Unknown
Yeah. And we'll mix those things, mix those up and figure out what's not in there. Exactly. One of the one of the one of my favorite memes. Yeah. Not trusting the government. So last week, we the jobs report came out. It was a lot better than economists expected, and it helped propel the markets forward a little bit.
00;00;54;26 - 00;01;19;07
Unknown
Employers added, a reported 272,000 jobs last month. The Labor Department reported that, and it was well above what everybody expected. And so, everybody saw that, as, you know, at least initially, as good news. And it drove the market up. I drove the markets up, but I wanted to talk about that a little bit, because I don't want people to get caught up in the euphoria.
00;01;19;07 - 00;01;43;02
Unknown
There's a lot of stuff buried in Down below that that we should really talk about to really fully interpret that number. Who's in the details? The devil, the devil, devil. He's there. Down there. He's he's back from Georgia and he's in the details. Playing that golden fiddle. Yeah, exactly. So lots of lots of, you know, people now on the payrolls, which is great.
00;01;43;04 - 00;02;09;10
Unknown
But in addition to that, or sort of accompanying that was that wages rose, 4.1% up from a year ago. Now, that's that's bad news because what we've been trying to do is fight inflation over the past year or so and all that, even though it's just a very small tick upward, it crosses the 4% mark and that that's sort of a, an emotional barrier.
00;02;09;10 - 00;02;29;02
Unknown
So now that wage growth is, is going it has gone up more than 4%. You know, it's got people worried about inflation picking up again really. Yep. I would have thought that wage wage growth was was a good thing. What's the 4% mean. Well 4% is is how much wages have gone up over the past 12 months on average.
00;02;29;02 - 00;02;50;02
Unknown
Whereas as a whole, as a whole workforce. And, you know, wage inflation can lead to price inflation because of companies have to pay their employees more, then they may have to raise prices on their products to and they have to for the to balance the books so they can afford to pay those folks. And so we worry about wage inflation because it can lead to price inflation.
00;02;50;04 - 00;03;12;08
Unknown
And and the fed has been desperately trying to get it down well below 4%, probably below 3%. And if if it's going if it's clipping along at 4%, well then inflation is alive and well. And the rate cuts that we are everybody's expecting sometime this year may not may not happen. They may not turn out to to take place in a lot of what's in the market.
00;03;12;08 - 00;03;42;00
Unknown
A lot of what's priced into the market is an expectation of 1 or 2 rate cuts this year. And we may not see that because, you know, inflation is clipping along. But that's but that's part of it. They have part of it is calling into question whether or not we will get rate cuts from the fed. But the other interesting part of that is that while, the number of jobs went up significantly and wage inflation went up, unemployment also rose at the same time.
00;03;42;00 - 00;04;04;18
Unknown
And so now it is the highest since January of 22. So they added jobs, wages went up and unemployment went up all at the same time. Exactly. Mass hysteria doesn't see arts and cats living together exactly that night. Black is white. That's right. Yeah. And and it can be hard to understand how the two of those things can be true at the same time.
00;04;04;18 - 00;04;31;29
Unknown
Right? Right. Well, part of it is, that there are a lot of people who were discouraged workers and just got out of the workforce. And so it's not just, you know, the number of people who are available to work is not a fixed number. And so you can have more jobs and more unemployment at the same time, if people realize that they have to get back to work or if they're entering the job force, you know, they're graduating from college and they're going into the workforce or that kind of thing.
00;04;32;04 - 00;04;50;05
Unknown
So the number of people in the workforce is not a is not a fixed number. And so now the other thing, the other thing that this masks is that you know, we can talk about how many jobs increased, but they're not. That doesn't mean that all of those jobs are 40 hours a week people going to work. Right?
00;04;50;06 - 00;05;14;02
Unknown
Right. So and that's one of the things that one of the, one of the one of those memes we keep talking about is, is that, more and more people are having more and more part time jobs. And so one person may actually have three jobs because they're all part time, because they can't find a full time job that they can do full time, and they need to work more to be able to pay the bills.
00;05;14;05 - 00;05;37;23
Unknown
And these are this number like this 272,000. That is a a W-2 type of job, right. Is it or does it also include 1099 contractor positions? It's a good question. I don't know that I'm not sure. I don't know what what what goes into that number from the Labor Department? I would think that it wasn't 1099 just because.
00;05;37;25 - 00;06;01;04
Unknown
272 even though it's two 252,000. Yeah, it's still kind of a small number compared to what I'm sure you know. So but there's a, it brings up a really good thing and that is that the Bureau of Labor Statistics cannot capture they can't perfectly capture employment, especially in the entrepreneurial sector. And I'm not sure if this is all W-2 or if it includes ten.
00;06;01;04 - 00;06;24;12
Unknown
They know, but that's one of the problems with the number is that, the the Bureau of Labor Statistics knows that they can't capture all of it. And so they're, they have these models that they use to estimate how many jobs are being created and how many jobs there are out there. And there's one called the birth death cycle, which has to do with the birth and death of companies and that kind of stuff.
00;06;24;18 - 00;06;44;17
Unknown
And some of those can be notoriously wrong. And so we really have to take a humongous grain of salt, because we know that this isn't just we heard from 272,000 people, and that's how many people went to work. A lot of this is mathematical modeling. It's not actually so a lot of it is a survey, but there's a fair amount of it that's actually estimated from a mathematical model.
00;06;44;21 - 00;07;10;14
Unknown
I was wondering about that because I just recently, added a part time employee to my business here. Yeah. And, I didn't tell anybody. I mean, the Department of Labor didn't call and say, hey, I heard you got a new guy. It's 272,001, right? Exactly. But but yeah, you know, we we filled out the, you know, the tax paperwork and all that kind of stuff, and he started working, but there there was no registration to say, hey, I added a job.
00;07;10;15 - 00;07;36;09
Unknown
Yeah. Right. Right. Exactly. Well that's interesting. And over the long run, you know, using those mathematical models is probably pretty close to reality. But here's the thing. It's notoriously inaccurate when there are turning points in the business cycle. And so what that means is that, you know, there are more and more economists who are saying these numbers look good, but things are not as rosy as they look, and they have all kinds of statistics to point to.
00;07;36;12 - 00;08;06;26
Unknown
And if that means that we are turning from a from an expansion, you know, and starting to lean in the direction of recession, then those mathematical models will be more, more inaccurate than usual. And so we really need to we really need to be, you know, again, be thoughtful and be careful about taking this at face value. The other one and the even the bigger one that probably the biggest one is, is that these kinds of numbers routinely get revised in subsequent months.
00;08;06;29 - 00;08;34;14
Unknown
And here's the thing. Everybody talks about the headline number, but relatively few people actually hear about the revisions. And, we're in an election year, right? The the the administration has a vested interest in the economy. Great. Sure. But, you know, if we take a look like in 2023, if we look over the last year, total downward revision, total downward revisions were 443,000 jobs.
00;08;34;17 - 00;08;59;26
Unknown
So that's like that's like the newspaper printing a retraction on page six. Exactly when the headline yesterday was completely inaccurate. Exactly. So I mean, you know, looking at this at the current month's numbers are notoriously inaccurate because these things get revised all over the place. Right? And so we really want to be careful about it. So the sort of the upshot of it is, you know, the it looks like the it looks like job growth is good.
00;08;59;28 - 00;09;30;15
Unknown
It looks and it continues to drive the market. There's still plenty of demand in the market. So according to our models, following the trend following the demand for the for for stocks, we're still fully invested. But we're keeping a closer and closer eye on things because there are all these little anomalies that are starting to add up. And it would not surprise us if the trend changed, which would of course, change our allocations a bit as we back away from things that have are starting to flip into a downtrend.
00;09;30;18 - 00;09;54;24
Unknown
I know that, you know, we were talking about how these numbers are important to politics. And so there's there's there's been an issue in this country about where do you get the right information, which information is actually accurate, which information is not, which is politically driven, which is, you know, whatever. What would you what advice would you give someone who wants to find out, you know the truth about all of this stuff?
00;09;54;24 - 00;10;11;03
Unknown
Yeah. Besides our podcast. And I want to be I want to be fair to like the Department of Labor and stuff. I, you know, did they I think that for the most part, they are dispassionate, objective servers of this stuff. But I just in the back of my mind, I can't fully discount, you know, the, the possibility of political influence.
00;10;11;06 - 00;10;36;19
Unknown
Those really are the best sources of that information. What I'm suggesting is just don't put, you know, just don't take any one statistic and put too much weight in it. We have to look over this course of time, and we've got to look at multiple different statistics from different sources. So the Department of Labor is a good, reliable source for information, but just don't make too much out of any one particular statistic.
00;10;36;22 - 00;11;04;22
Unknown
So things look good right now. But we are keeping a close eye on it and we're ready to respond whenever it does turn. Would you like to get a little financial update every week? Just a little tidbit of financial news, a few articles that I found interesting and wanted to pass along to my followers. And a couple of thoughts from me about what's happening in the markets about a financial planning topic, and a little bit about what's going on in my life.
00;11;04;24 - 00;11;25;21
Unknown
Then sign up for our free newsletter at Focused Wealth advisors.com/publications. Every Friday you'll get a little newsletter with some links to some financial articles. There is never a gateway you'll be able to read every article that I send out. You don't have to subscribe to those publications, and they'll be curated so that you get articles that are interesting to you.
00;11;25;23 - 00;11;46;09
Unknown
Focused wealth advisors.com/publications. All right. So what's your 30 minute action item for this 30 minute action item is check your stock and bond mix. Stocks are up so much they may have grown to be a larger proportion of your portfolio. It's a good time to rebalance before things have a chance to change. I remember once upon a time you said the numbers don't lie.
00;11;46;12 - 00;12;24;06
Unknown
You just said they did. I did not say that. Thanks for tuning in again to the 30 minute money. You can find us on all the platforms, of course. Three zero minutes money. Steve is at focused Wealth advisors.com. You can find me at ROCVox.com We will catch you on the next episode of 30 Minute Money. Thanks a lot.