That’s Some ‘Sweet Spot’

December 2014 was something of a high-water mark. Early on in that month, the BLS had published payroll numbers (Establishment Survey) that too many confirmed the narrative. For the previous month, November, the US economy purportedly added massive 321k new jobs.

The media was predictably uncontrolled in its glee. Any survey of mainstream headlines for that particular report contains all the usual glowing buzzwords. “Strong”; “robust”; the “best in decades.” For the Wall Street Journal in particular, the US economy had, thanks in large part to Mr. Bernanke’s “courage” its writers and editors just knew would eventually work, at long last finally found the “sweet spot.”

It wasn’t just the labor numbers, either. A few weeks after the BLS publication, the BEA put out revised Q3 2014 GDP estimates. They had previously reported that growth in that prior quarter was more than 4%, but a few days before Christmas they figured instead that it was slightly better than 5%. Euphoria all around.

Like the payroll report, that was the best anyone had seen in this country in years. With the Fed more and more comfortable about removing its “accommodation”, it seemed time, appropriate even, to dare to dream.

The U.S. economy is rounding out 2014 in a sweet spot of robust growth, sustained hiring and falling unemployment, stirring optimism that a postrecession breakout has arrived.

We all know how it turned out; was at that moment already turning out. The problem then was the same as a lot of times, including now. “We” tend to take for granted what exactly it is these statistical snapshots provide. They are momentary numbers that don’t really tell us all that much by themselves. Any monthly figure, or quarterly figure for that matter, just isn’t that significant.

One quarter of 5% GDP is utterly meaningless. In fact, two straight quarters of 4.5% growth or better made no difference whatsoever. The Establishment Survey went off, averaging by late 2014 more than 250k a month. None of it meant what everyone said it did largely because they ignored all the gathering evidence these good numbers were a tiny holiday island in the ocean of malaise. Trends don’t break so quickly, at least without legitimate energy (and QE just was never going to be that).