Heeere Comes Lucky!
September 15, 2013·0 comments
The most-watched labor statistic in markets is administered by an agency that doesn't actually administer it. The data is systematically biased in ways the government acknowledges but doesn't correct. And yet every Thursday at 8:30 AM, markets convulse on its release. What happens to capital allocation when the signals guiding it are known to be corrupted?
• The unemployment claims report is treated as critical market intelligence despite being flagged internally as unreliable. Errors in the data increased 300% from the Bush to Obama administrations, with systematic underreporting of actual claims. The Labor Department's own statisticians know this but have done nothing to fix it.
• Predictable timing, not analytical value, explains the report's media prominence. The data arrives every Thursday at exactly 8:30 AM with enough surface-level relevance to labor conditions that highlighting it seems defensible. This regularity and schedulability make it perfect for media production cycles, not fundamental investing.
• The Federal Reserve doesn't actually use this data in policy decisions, yet markets treat it as a Fed-relevant signal. There's no explicit link between weekly claims and monetary policy communications. The market's fixation on this particular metric doesn't match what the institution supposedly driving market behavior actually cares about.
• What matters isn't whether the data is true but whether everyone believes everyone thinks it matters. Once a signal gains this status, ignoring it becomes irrational even if you privately doubt its validity. The game persists because the cost of non-participation exceeds the cost of participation.
• Markets have engineered an accelerating system of artificial data releases designed to generate trading activity rather than inform investment decisions. Housing alone now commands attention across weekly mortgage applications, multiple monthly housing metrics, and sentiment indices. The proliferation of these "events" benefits every institution that profits from trading volume, regardless of whether that trading is rational.
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