You might be surprised how much of my 32-year career in the City of London was spent thinking about a single economic indicator: U.S. nonfarm payrolls. A lot revolved around predicting that number, waiting for that number, analyzing that number and (one way or another) betting on that number. But times change.
The preoccupation was always hazardous, of course. The payrolls figure was extremely hard to call, and it was often revised a lot, too. In the late 1980s, a primary dealer went bust because of a bad bet on payrolls; one of the culprits later told me that the number as subsequently revised would have made the bet pay off. In any event, back then the indicator measured something that really mattered in global economic terms: the state of the U.S. labor market. These days, I wonder why anyone outside the United States pays that much attention.
Analysts who follow the U.S. economy still need to be interested, of course. Under the Federal Reserve’s recent monetary-policy guidance, the unemployment rate, which accompanies the release of the payrolls, was deemed a “threshold” for possible tightening. By degrees the Fed is moving away from relying on this lagging, unreliable statistic, whose message is also clouded by changes in participation rates and other complications. (Weekly jobless-claims numbers are probably a better leading indicator anyway — including for the U.S. stock market.) Even so, in the U.S., the payrolls data still matter. I suppose I can see why traders and analysts who focus on the U.S. are still glued to their screens at 8:30 a.m. New York time on the first Friday of every month.
For the internationally focused, it’s more of a puzzle. The world has changed. In the late 1990s, the U.S. accounted for almost 20 percent of world imports: Through that channel, changes in the U.S. directly affected the rest of the world — and the U.S. labor-market data was crucial information. In 2013, U.S. goods imports were in the vicinity of $2.3 trillion. That’s about 14 percent of U.S. gross domestic product and just more than 12 percent of world imports — less than in the late 1990s.