Is the Economic Data Reliable?

Executive Summary

There are many claiming the U.S. Economy is strong; however, in this issue I am going to point out some data discrepancies. FHN Financial published their GDP projection with no outlook for recession. The second graph below shows when the unemployment rate rises above the 36-month moving average, a recession always follows (big discrepancy). So, is the job market as strong as claimed? According to Global Markets Investor via X, if one excludes government jobs, the job market actually SHRUNK (see 4th graph below). Global Markets Investor also stated if the seasonal adjustment used in 2023 was used in 2024, then total employment would have declined. Continue below and form your own thought on the data discrepancies.

Please proceed to read The Details below for more information.

“You can have all of the fancy tools, but if [your] data quality is not good, you’re nowhere.”
–Veda Bawo, Data Governance Advisory at JLL Technologies

The Details

There have been a lot of discussions of late regarding the state of the economy. Some say the economy is strong. Others, like me, have indicated a recession is close. The conundrum arises when the macro statistics do not agree with the more granular data. It was Mark Twain who stated, “Facts are stubborn things, but statistics are pliable.” Those who claim the economy is strong point to data such as the change in GDP (Gross Domestic Product) or the unemployment rate. Yet, under the hood these numbers include the opportunity for being “pliable.”

The “strong” argument was set forth by FHN Financial in their recent Economic Weekly publication. In the graph below they project fairly consistent GDP growth with the presence of no recessions. They also show, in another graph not included here, that the unemployment rate could fall.

This outlook is inconsistent with the conclusion derived from the graph below from Datastream/SocGen. This graph shows that every time the unemployment rate rises above the three year moving average, a recession follows.

This is corroborated by the following graph from Bravos Research. This graph estimates the probability of a recession, now at 57%. This was only exceeded three times since 1960 – in 1974, 1980 and 1983. All ending in serious recessions.

The string that many proclaim has held up the economy is the jobs market. But is it really as strong as claimed? According to Global Markets Investor via X, “When we exclude government jobs the job market has actually SHRUNK by 28,000 private sector jobs. Private job creation has been falling for 3 years and its 3-month moving average dropped to the lowest since the 2020 pandemic.” This is illustrated in the graph below prepared by DoubleLine.

Global Markets Investor continued, “Moreover, the seasonal adjustment factor for October was the highest on record. [Is it pliable?] If the adjustment was the same as in October 2023 then the total employment (incl. government jobs) would have DECLINED by 53,000.”

If employment was strong, why were 78,000 manufacturing jobs lost during the three months ending October 31, 2024? And the post in X below from Bravos Research shows the plunge in job openings.

Above, I have illustrated a few of the indicators that contradict the “the economy is strong” mantra. There are many more examples I could provide but won’t for brevity’s sake.

Suffice it to say that there are many subjective adjustments to economic releases. To avoid entering the fold of conspiracies, let’s just say the mainstream narrative is intended to be optimistic. However, the underlying data is far from being supportive. There is enough discrepancy to say the statistics are pliable.

The S&P 500 Index closed at 6,051, down 0.6% for the week. The yield on the 10-year Treasury Note rose to 4.40%. Oil prices increased to $71 per barrel, and the national average price of gasoline according to AAA remained at $3.02 per gallon.