May 10, 2021 - Economy

April jobs report shows how "data fog" is clouding economic forecasting

Data: FactSet; Chart: Axios Visuals

Friday’s huge miss versus the prediction for April jobs gains sparked a knee-jerk markets reaction as investors struggle with what to make of the historic disappointment.

By the numbers: The S&P 500 ended Friday with a gain of less than 1%, while yields on the 10-year Treasury dipped initially but ended the day nearly even with the open, at 1.56%.

Yes, but: Many economists say one month doesn’t change their long-term views on the economic recovery.

  • "We're in a data fog," James Sweeney, chief economist at Credit Suisse, tells Axios.
  • There's no statistical model for forecasting the return to work over the short term, "in the context of a certain rate of vaccinations and very strong recent household disposable income from stimulus checks. So people are guessing," he says.

The big picture: The consensus view says last month "will prove a fluke and that data for May and after will look more like that of March," writes Western Asset's Michael J. Bazdarich.

The bottom line: Initial trading was largely driven by expectations that the delay in jobs growth prevents any early Fed moves on interest rates.

  • But by and large, "people realize the data are not giving us as much concrete information as usual, especially about medium and longer term trends," Sweeney notes.
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