There’s an old story about Charles Darwin, which may or may not be true but seems appropriate to our current economic moment. According to the tale, two boys glued together pieces of various insects – a centipede’s body, a butterfly’s wings, a beetle’s head and so on – then, as a gag, presented their creation to the great naturalist for identification. “Did it hum when you caught it?” he asked. When they said yes, he declared that it was a humbug.
That’s kind of where we are in the economy right now. I’m not suggesting anyone is faking the data, but the different pieces of information we have don’t seem to line up – they almost seem to come from different countries. Some data suggest a weakening economy, maybe even on the verge of recession. Some suggest an economy still going strong. Some data suggest very tight labor markets; others, not so much.
Let’s talk about the numbers, and how they don’t add up.
The number we usually use to assess where the economy is going is real gross domestic product – and according to the official estimate, real GDP shrank in this year’s first quarter. We won’t have an official (advance) estimate of second-quarter GDP until later this month, but “nowcasts” that try to estimate GDP based on partial information – like the Atlanta Fed’s widely cited GDPNow – suggest slow growth or even an additional period of shrinkage.
Among other things, another widely used number – job creation – is telling quite a different story. The official estimate of growth in nonfarm employment in June came in quite strong – 372,000 jobs added – which doesn’t look at all like what you’d expect in a recession.