All The Economic Data Is Wrong
It’s economic data driving the stock market, the oil market, mortgages, credit card rates, and even more economic data. It’s a virtuous cycle, and the quality of information is critical. We can get a handle on everything when the broad points are stitched together, but economic data is changing all the time. It can be really, really, hard to collect.
The US Labor Department just issued a jobs report. It’s from three weeks ago, declaring 20,985,000 unemployed. The Labor Department also just released an unemployment insurance report, which tallies those claiming jobless benefits. It showed 29,965,415 unemployed. The department has issued two hugely conflicting datasets, and it doesn’t know which is wrong!
It might surprise investors that data is tracked with just phone calls and questionnaires, but the margin of error still isn’t usually this wide. The volatility amid the crisis has rendered some datasets less useful, but they’re still moving the markets.
We could be in for a massive correction in economic data in the next month. The US government needs to recalibrate tallies and plug holes as the economy stabilizes. The issue for investors participating in the post-corona rally is that adjusted data might paint a worse picture than expected. It could also paint a better picture. We just don’t know.
The uncertainty has prompted an altered strategy for some investors; instead of investing around macroeconomic predictions, just look at individual situations and try and make money. It’s about going micro and keeping a large short-term cash balance on the side if an opportunity to lower cost bases comes your way.
If economic data is about to get revised, where do you reckon it’ll go, and has the stock market set expectations too high with a 40% rally from coronavirus lows?
