I wasn’t disappointed by Friday’s employment report because I don’t pay all that much attention to the preliminary payroll estimate for the latest month, which was only 88,000 for March. Rather, I give much more weight to the regular revisions in the previous two months' payrolls, which were both increased by a total of 61,000 for January and February. Over the past three months through February, payrolls are up 211,700 on average, the best since the three months through March 2012. Over the past 12 months, revisions added 449,000 to the jobs tally, based on first-reported data. During economic expansions (recessions), revisions tended to be to the upside (downside).
Previously, I’ve noted that the monthly employment report has so much information that it can be confusing. Pundits tend to make it even more confusing since optimistic ones usually will find some numbers to support their view, while pessimists can do the same. So I was surprised to hear that the commentators assembled on CNBC Friday morning all seemed to conclude that it was an unambiguously bad report. I disagree.
To cut through all the noise, I focus on just one number, which I calculate by multiplying aggregate hours of private industry workers by their wage rate, i.e., average hourly earnings. The resulting YRI Earned Income Proxy (YRI-EIP) is highly correlated with wages and salaries in private industries, which is included in the monthly personal income report. My proxy was boosted by the upward revisions in payrolls and now shows a solid gain of 2.8% over the past five months to a fresh record high.
Today's Morning Briefing: Not so Bad. (1) Friday’s shocker wasn’t so shocking. (2) Revisions are more useful than first estimates. (3) Proxy for wages & salaries at record high. (4) Mixed bag of employment indicators. (5) Bad weather vs. fiscal drag. (6) No rush to phase out QE after Friday’s numbers. (7) The puzzling weakness in the labor force. (8) The Baby Boomers are checking out. (9) Draghi is committed to the euro, but admits ECB has limits. (10) Draghi disses Dijsselbloem twice in one day! (More for subscribers.)