See No Evil: What We Chose to Ignore in the April Jobs Report

We live in an age where bad economic news is not only unwelcome, but it is routinely overlooked or excused. On the other hand, good news is spotted and trumpeted even when it doesn’t exist. An ideal illustration of this dangerous tendency towards collective selectivity came last week when the markets and the media somehow turned an awful employment report into an ideal data set that confirmed all optimism and contained nothing but good news for investors. In truth, it was anything but.

The stakes were high with this year’s April non-farm payroll report. It was the first major employment report of the Second Quarter and it was hoped that it would show an economy bouncing back from a sluggish winter. But there was cause for concern. The March report had been an unmitigated disaster. Only 126,000 jobs were created when 247,000 were expected. Then, two lesser April employment reports had been released, the ADP private payroll data and the Challenger jobs cuts report that came in far below expectations (Challenger showed the biggest month over month increase in layoffs in three years). Even more harrowing was the recently released .2% annualized GDP in the First Quarter, a dismal April trade deficit, and the worst back to back monthly productivity reports in almost a decade. We needed good news, and we needed it bad.

The April report’s headline was all most people needed to see before breathing a collective sigh of relief. 223,000 jobs were created during the month, which was a full 3,000 jobs more than the 220,000 that had been predicted by the consensus of economists. In addition, the unemployment rate held at a very low 5.4% (matching the consensus), the lowest number since the Market Crash of 2008. The steady rate, and the modest beat (of a modest expectation) were received like a strand of garlic to ward away evil spirits. Icing the cake was the understanding that the report was not so good that it would accelerate the Federal Reserve’s timetable to raise interest rates. As a result, it was termed a “Goldilocks” report, which many consider to be the best of all possible outcomes. But even a casual look beneath the surface should have thoroughly deflated the euphoria.

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