#Economy & #Stocks Review - Shut It All Down

E&S Review

Much of today's economic data, including officially collected and produced time series, is highly unreliable. Statisticians use well-documented techniques such as geometric smoothing, seasonal adjustments, substitution, double counting, and hedonic adjustments to modify economic outcomes dating back to the 1980s. Politicians and central bankers often leverage these techniques for political gain.

Data manipulated by these statistical methods are frequently revised without clear notification to the public, especially when administrations or public policies change.

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Shut It All Down

Private payrolls fell by 32,000 in September, the biggest drop in over two years, signaling a weakening labor market as the government shuts down and threatens mass layoffs. August’s job gains were also revised to a loss of 3,000. The decline comes as a government shutdown threatens to delay official labor data. Losses were broad across sectors, though education and health services added 33,000 jobs. Small businesses lost the most, while large companies gained jobs. Wage growth remained steady at 4.5% annually, but slowed for job changers. With the Federal Reserve's next meeting approaching and official data potentially delayed, the ADP report takes on added importance.

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What stands out isn't just the 32,000 job loss in September, but also the sharp revision of August’s gain from 52,000 to a loss of 3,000. Today's report marks the second straight month of weakness, something rarely seen outside of recessions. Yet, government officials waiving their arms tell you everything is ok. Back-to-back declines are similar to early 2000 and late 2007, just before the economic wheels fell off the Economic Activity Composite (EAC) and US Economy.

Critics may dismiss ADP data, claiming BLS employment figures, which are deeply flawed, move markets. Why fight the crowd? Step aside and take the opposite trade of the misguided. It’s a smarter move. ADP uses real payroll data, while BLS leans on surveys, tweaks, and a birth-death model that’s a red flag for those in the know. For more, check Economy & Stock Report updates.

The ADP report matters even more now since the government shut it all down. While the majority will fight to defend “the Matrix” and its version of reality, it cannot think critically to see the real world. Cracks in the facade show up in real-time rather than government data. Remember this every time the Fed cites government data as a driver to policy changes.

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