Getting it wrong – UBS

The US will be revising last year’s non-farm payrolls data. Markets have a heightened interest in the labor market, and these revisions are likely to be negative. However, this does not change anything about the economy. Making payrolls marginally less inaccurate is about spin, not substance. Consumers have been spending this year based on the labor market they experience, not the labour market that was reported, UBS macro analyst Paul Donovan notes.

Buoyant tax revenues suggest better economic growth

“The Federal Reserve minutes are due—with investors presuming that the period of policy error is about to end in September, with a rate cut. The Fed is late in cutting rates, but the relative stability of real borrowing rates means it is not a catastrophic error. The revisions to labor market data do emphasize the risks around Fed Chair Powell’s ‘data dependency’ approach.”

“Early August export data from South Korea showed ongoing strength in semiconductor exports. However, this is probably more about the hype around artificial intelligence than any strong signal about global consumer demand for goods.”

“UK fiscal data showed strength in tax revenues (which the government was quick to spend). Tax revenue data matters because as structural change accelerates, traditional economic statistics may miss economic activity. Tax collectors rarely miss anything, so buoyant tax revenues suggest better economic growth.”