Follow the Right Jobs Number

The press not only celebrated prematurely -- it also relied on nongovernmental data.
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There I was on Wednesday, innocently minding everyone else's business reporting, and just starting to get all jazzed about the eagerly awaited government jobs data set to come out on the first Friday of the month, in this case today at 8:30 a.m.

Then, suddenly, I found myself besieged on the quiet Wednesday morning, two days early, by excited headlines about jobs data. And not only did the jobs data surprisingly come on Wednesday, the report was so good that everyone's worries about the economy could abate and the stock markets soared.

Yelled

Reuters

: "

Market rallies as jobs data calms growth worries."

Panted

CBS MarketWatch

: "

U.S. stocks cheered by bullish economic data."

When the business media had a bit of time to analyze the data, the fill-out came and excitement built. Within a couple of hours,

Reuters

hit up with an expanded story, which began the process of burying economic worries, by adding the adjective "big" to those jobs gain numbers and trafficking in talk of dispelled economic worries: "

Big hiring gain dispels some economic gloom."

Worse, the report described the data, which again unexpectedly came on Wednesday instead of Friday, as "robust" and said it should tamp down worries about the abysmal housing market:

"The unexpectedly robust hiring data held the most sway on Wednesday, suggesting turmoil in housing and financial markets may not be as damaging as feared and that the Federal Reserve may not need to cut interest rates aggressively next week."

This all had the hearty Business Press Maven blanching pale. Did I forget that the Labor Department numbers were coming out Wednesday? It couldn't be. The Bureau of Labor Statistics would have made much ado about changing its release date. Then, in the 10th paragraph of the

Reuters

report, my color returned, to a raging red, because it was that deep in the story that

Reuters

deigned to inform its readers that these were numbers from the ADP National Employment Report, not the United States Bureau of Labor Statistics.

This matters greatly, you see, because ADP is a combined effort of a pair of private, for-profit, organizations --

Automatic Data Processing

(ADP) - Get Report

and Macroeconomic Advisors, a Missouri forecasting outfit -- to essentially predict the Labor Department numbers.

This of course raises the more-than-appropriate question, what is the report's long-term track record in predicting the Labor Department numbers? It's an appropriate question, as these good growth numbers, instantly glommed onto by the business media as if handed down from the mountain on a tablet, were being reported with buried mentions that they were different from the numbers that most people were used to seeing.

So what is that long-term track record? Well, there isn't one. The number was just invented a little over a year ago. Look at

this press release announcing it. Careful -- the ink is barely dry.

I guess it should be no surprise then, though it was to many business media readers, that the employment numbers so central to the future economic and interest rate picture, released by the Labor Department this morning at 8:30 a.m., told a slightly different, and not insignificant, story.

The ADP numbers showed a super-strong economy. The BLS number showed a more measured picture. The total nonfarm job creation number ticked in at 94,000 for November, and this first draft of the numbers is likely to be revised (revisions of the two previous months cut a total of about 50,000).

That meant not a surging economy that would lift even the housing sector but a job picture slightly above expectations. But only slightly above, and, considering the revisions, who knows? By the way, the more measured outlook is a bit better for those (like everyone and their brother) who are waiting on an interest rate cut. Yet the key is defining the validity of a

much-discussed economic number.

Anyhow, the release date of the next ADP number has been changed to Thursday, Jan. 3 from Wednesday, Jan. 2.

I'm not saying that this number won't become legitimate in time. But it is very new and has a lot to prove. Don't fall for the business media essentially reporting it as if it's the Labor Department number, burying any warnings or any mention of differences, well beneath the headlines and leads. As always, beware. And be aware.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;

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