Economic data never tells a perfectly clear story, but lately the contradictions have been especially jarring. Just a week apart, the government delivered two sharply conflicting messages. One report showed job growth stalling and unemployment rising. Another showed the economy expanding at a blistering 4.3 percent annual rate — more than double the pace of the first half of the year.
Are we sliding toward recession or entering a new boom?
The uncomfortable answer is that the data is unusually foggy (and foggy because of the normal challenges of measuring a large and complicated economy; I have no reason to suspect the data was politicized). There are three plausible interpretations — and while the truth is likely some combination of all three, policymakers cannot afford to assume they know the answer for sure.
The most pessimistic interpretation is that the labor market data is right and G.D.P. growth is being overstated. Both employment and G.D.P. figures are revised over time, but historically, G.D.P. revisions tend to be larger. When the two conflict, it is usually safer to trust the jobs numbers. Moreover, the employment data run through November, while the G.D.P. figure reflects the third quarter, which ends in September. On this view, Tuesday’s weak labor market could show up as slower growth in the fourth quarter G.D.P. report.
I am skeptical of this explanation. One well-measured component of economic growth is consumer spending, which represents more than two-thirds of the overall U.S. economy. And American consumers have been spending at a surprisingly rapid pace this year, based on a combination of lower-income consumers stretching their borrowing and higher-income ones spending some of their newfound stock market wealth.
The most optimistic interpretation flips the story around: G.D.P. is right, and the labor market data are misleading and will eventually be revised upward. There is some support for this view. Private-sector job growth has been solid, and headline figures of total jobs have been dragged down by a sharp decline in federal employment — 168,000 jobs lost over the past two months.
Still, there are countervailing signals. Jerome Powell, the chair of the Federal Reserve, has argued that the official data may be overstating job growth and, in fact, the economy may have lost jobs in recent months. In particular, the surveys used by the Bureau of Labor Statistics to compile the jobs numbers can go awry when there are abrupt changes in business creation or business failure.
The third possibility is the most intriguing: Both data sets are broadly correct. G.D.P. really is booming — but it is being produced with little or no additional labor. If so, productivity growth in the third quarter must have been extraordinarily strong, roughly matching the G.D.P. growth rate given flat aggregate work hours.
If true, some would see this as the long-awaited arrival of artificial-intelligence-driven productivity growth — output rising as machines replace workers. I remain skeptical. The evidence so far does not support large-scale job displacement from A.I., and it is always risky to draw sweeping conclusions from a single, volatile quarter of data. Most businesses will take a while to figure out how to adapt A.I. into their work flows, so I expect and hope big productivity gains are coming; I just do not see them as having happened yet. A more prosaic explanation is that growth is concentrated in productivity-intensive sectors, such as data centers, that generate substantial output with relatively few workers.
It could take years before we know which of these explanations is correct — if we ever do at all. The jobs and growth data will be regularly revised based on more comprehensive tax data and more complete surveys; several years from now, the official government data for jobs and growth in late 2025 will likely read very differently from how they do today. It would also take a few years to convince me that we were already enjoying an A.I.-fueled productivity boom and not just a volatile, temporary blip.
The confusion in the economic picture is not limited to growth and jobs. The inflation picture is also murky. Inflation has hovered around 3 percent for nearly two years, but the latest Consumer Price Index report showed a notable step down, raising fresh questions about data collection and measurement, particularly in the wake of the recent collection disruption of the government shutdown.
When interpreting the macro economy, it is always best to look across a broad range of indicators and over longer periods of time. When a single volatile data release suggests the economy has suddenly turned sharply for better or worse, it is usually wrong; reality tends to be smoother and more moderate.
It’s probably true, then, that reality in this case is smoother and more moderate. Unfortunately, there’s a reason I say probably — sometimes it isn’t that way. Using the latest data to modestly update the views you use for business planning or conducting monetary policy creates the risk of falling behind the curve. In this case, however, we don’t yet know which curve we would be falling behind.
Jason Furman, a contributing Opinion writer, was the chairman of the White House Council of Economic Advisers from 2013 to 2017.
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