The recent GDP report aside, the economy still has underlying strength. The third quarter GDP was estimated at +1.6%, a figure that we believe will be raised in the next two revision cycles, but probably not much above the +2% level. GDP goes through three quick updates—the advance report, which this was; the preliminary, released a month later; and then the final report, released a month after that. Every month there is a new GDP report that focuses on just one quarter. The number can change significantly, which I explained in a prior column. We have now had 20 consecutive quarters of positive GDP reports, though this one was below the average of +3.2% and revisions won't take it that high, for sure.

The unemployment report shocked many, as the rate dropped to 4.4%, the lowest in five years. Never reported in the press is that there was a record number of employed persons, and barely reported was that revisions to prior months combined with this last month's increase added more than +200,000 to the prior hiring estimates. Add that to the +810,000 jobs that they “found” a couple of months ago (buried on page 5 in a footnote), the Bureau of Labor Statistics somehow found 1 million more payroll jobs just in the past three months.

Nowhere did I see reported that the household survey, which is used as the basis for calculating the unemployment rate, showed an increase of +427,000 jobs. Gradually, the payroll data has been catching up to what the household data have been showing. Remember, the household report is the only one that detects small business and self-employed workers well. The payroll survey still relies on models that use the reports from biggest employers and their social security tax submissions and other large-company focused data sources. I still recommend Barron's economist Gene Epstein's book Econospinning to all who desire to get insights into the government data collection, reporting, and analysis process. He now has aWeb site devoted to the book and its theme.