Today’s labor market data came in line with expectations. Unemployment held steady at 4.2%.
Economists yawned. Markets – no doubt relieved to have something else to talk about besides the Trump/Musk feud – pushed higher.
But we can’t help but notice a growing gap in the data:
The government’s employment data looks much stronger than data provided by ADP – the private sector payroll giant. Of course, ADP is basing its data on actual customers, and not making all sorts of seasonal or one-off adjustments.
There may be a case for those adjustments. But with a growing gap that causes the government’s data to look rosier than the private sector – it’s a warning sign.
And with many government job cuts still not showing up in the data – you can’t file unemployment while you’re still on severance – the trend is likely to worsen before it gets better.
Our colleague Andrew Zatlin, the #1 payroll analyst on Bloomberg, has made similar observations – that the trend will start to get worse in the third quarter, and that government revisions will likely start to bring today’s gap down as well.
Until then, mind the gap.
~ Addison
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P.S. There are plenty of moving parts in the economy right now, and we explored several of those trends with Frank Holmes yesterday on Grey Swan Live!
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