No Disparity

Alas, their providence is lost for all posterity. But there is a consensus of opinion both quotes originated in whole, in part, or, at least, were popularized by Samuel Langhorne Clemens (aka, Mark Twain). Given his reputation for a wicked wit and ready repartee, Clemens, if not the first to utter these observations regarding numbers and human chicanery, would have found them apt for the gilded age of excess during which he lived and wrote.

Clemen’s observation, “Lies, damn lies and statistics.”, is a corollary of sorts to his other reputed statement that, “Figures don’t lie, but liars do figure.” Both are a warning to be wary that half-truths and outright lies often wear the guise of science or bear the testimony of experts.

Investors today are well advised to remember both quips. There is much noise in the market; and, often the distortion is magnified by the very media we trust to filter, to explain and to clarify events and trends.

Is the U.S. economy slowing? Is the recovery waning? Of the contradictory signals of late, which should an investor rely upon more in formulating his strategy and allocating his assets?

On the face of it, one may be forgiven for not considering the direction of the economy to be self-evident. Ostensibly the stats appear mixed, with some suggesting a slowdown while others indicate strength. The problem is not the disparity in direction. The problem rather is the disparity in reporting. Certain statistics – namely, the Bureau of Labor Statistics’ (BLS) monthly employment situation report – lend themselves to deception by want of context. Other numbers – the quarterly growth rate in the Gross Domestic Product (GDP) – depend less on scale for interpretation.

If the monthly payroll report exceeds 200 Thousand net new jobs, there is euphoria in the White House corridors. Such so-called strength is taken and advanced as a sign the recovery is not faltering. The interpretative problem resides in the base scale. Now in 2015 total non-farm payrolls averaged 148 Million positions. Over the course of the year approximately 2.7 Million new jobs were created. This works out to a 1.9 percent increase year-over-year.

Seems like a respectable performance. Except when you compare it to annual job growth in other post-war calendar years. Then the economy’s recent achievement falls far short.

Including 1951, non-farm payrolls have expanded in 51 of the last 65 calendar years. Last year – 2015 – ranks 18th from the bottom. The prior year – 2014 – ranks 24th: again from the bottom. The year before – 2013 – places a dismal 13th overall.

Another yardstick is the pace of job creation at the corresponding point (54 months after the recession trough) for the 1980/82 recession. Before the so-called Great Recession, the 1980/82 downturn was the most severe post-war recession experienced. Those who came of age during those years will remember the sharp contraction in payrolls, the lines of unemployed and the difficulty finding work.

In May 1987 (54 months after the November 1982 recession trough), total non-farm payrolls numbered 102 Million. Over the next 12 months, 3.2 Million net new jobs were added to U.S. payrolls. This translates into 3.1 percent gain. In 1987, jobs grew by 3.1 percent; in 1988, payrolls grew at a similar pace. The annual performance for these two calendar years rank 15th and 16th, respectively, compared to the other 51 calendar years in which payrolls expanded.

Consistently Mediocre

The current job gains robust? By no stretch of the imagination. Nor by any credible historical benchmark.

Is there a disparity between payroll growth and real GDP growth? None. For the past six years performance for both measures has been consistently mediocre. Now not that one would know it reading the newspaper of listening to the evening news.

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