As they do at the beginning of every month, the financial press this week will be looking ahead to 8:30 on Friday morning. That’s because, being the first Friday of the month, it’s when the Labor Department releases its monthly jobs report, showing the change, if any, in the unemployment rate and, crucially, delivering the preliminary estimate of the number of jobs created in the prior month.
To the general public — meaning those who don’t turn to the financial pages first when they pick up the (increasingly metaphorical) paper — the jobs number might seem like the only economic indicator anybody cares about. It’s generally the only one that generates front-page news in the mainstream press, and it’s probably the most easily understood.
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In general, the jobs reports for the past year have been pretty predictable. Despite weather-related shortfalls early in the year, the U.S. economy has been creating jobs at a reliable clip of about 225,000 per month all year.
However, that may give an unduly one-dimensional picture of the economy for those who don’t dig deeper into the voluminous number of economic indicators released by both the government and the private sector every month.
For example, last week alone presented a bonanza of data to those seeking information and insight about the direction of the U.S. economy.
On Tuesday, the Conference Board released its monthly Consumer Confidence Index report, which found that despite continued job growth, low interest rates, and an increasingly strong U.S. dollar, consumers were less confident about their futures than they were a month ago.
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The report, which uses 1985 as a baseline (meaning that the confidence level in 1985 is equal to 100) found that in the space of a month, consumer confidence fell from 94 to 88.7.
The report from the Conference Board came out the same day that the Commerce Department’s Bureau of Economic Analysis released its monthly report on the Gross Domestic Product. The BEA’s findings were, to say the least, somewhat inconsistent with the sentiments of the general public.
The GDP report showed that the economy grew at an annualized rate of 3.9 percent in the third quarter of 2014, and it revised its growth rate for the second quarter up to 4.6 percent, placing the U.S. economy well above those of most other major industrialized countries in terms of current growth rate.
On Wednesday, though, the University of Michigan’s Consumer Sentiment Index was released, and it found that people were generally feeling better about things in November than they had the month before, counter to the findings of the Conference Board. The Michigan survey (baseline 1966), in fact, rose to 88.8 from 86.9 month-to-month, hitting a high not seen since the pre-recession days of 2007.
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Everyone took a breath on Thursday, as the country shut down for the Thanksgiving holiday (except for people paying attention to the OPEC meetings happening in Vienna).
But on Friday, we woke up to the monthly Purchasing Managers Index report from the financial information firm Markit. The index, which tracks growth in the service sector of the U.S. economy, fell for a fifth consecutive month, prompting a warning from Markit Chief Economist Chris Williamson that the economic recovery has “lost considerable momentum.”
The message here is not that someone curious about the state of the economy ought to ignore individual indicators, or be shocked by those that appear to contradict each other. On the contrary, they each have their value. The important thing is to recognize that they are called “indicators” for a reason.
Gray skies may indicate that rain is likely, but they are no guarantee of precipitation. Similarly, economic indicators, taken individually, may suggest doom or delight, but with no true promise of either.
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