The U.S. job growth released this week was weaker than expected for the period of April 2024 to March 2025 and was revised down 911,000 jobs from initial estimates. The final revision for job creation will be in February 2026. The final revision for the period ending February 2024 was revised down by 589,000 jobs, so it is likely two straight years of significant downward revisions in job growth. The Bureau of Labor Statistics (BLS) monthly jobs numbers are high-frequency data, which affects their accuracy. Monthly jobs data is benchmarked back to the Quarterly Census of Employment and Wages (QCEW), which is based on quarterly tax reports and comes at a significant lag (March 2025 data was released in September). Economists point to multiple potential causes for the overestimates:
- Unreliable Firm Birth-Death Model: The BLS uses a statistical tool to estimate the number of jobs created at new firms and jobs lost to business closures. Some have found the tool is particularly unreliable during certain periods of the business cycle, particularly at either mid-cycle or the end of the business cycle. The pandemic and subsequent economic environment are still impacting the reliability of data.
- Declining Survey Response Rates: With declining survey responses, sampling errors are higher, and predictive models are less reliable.
- Adjustments for Asylum-Seekers and Undocumented Workers: The BLS survey asks employers for the number of people on their payroll, while the QCEW data is based on unemployment insurance claims. The QCEW data may undercount certain populations as they are ineligible for benefits.
This points to an economic landscape for the U.S. that was weaker than expected entering 2025 and lends to the Federal Reserve cutting interest rates at their meeting next week. On the positive side, with job gains lower than estimated but GDP growth still positive, this suggests a potentially higher productive workforce. U.S. Job Growth Weaker than Previously Thought | CNN Business
Good Stock Market Returns Shouldn’t Impact Your Savings: The S&P 500 has compounded returns of 15% annually over the past decade, higher than its long-term average of 10.3%. A concern is that individuals will bank or plan on returns like that going forward and reduce their retirement savings. If individuals are saving less, they are spending more, which can lead to underestimating their spending in retirement. Some studies estimate that individuals spend 93-97% of their pre-retirement income during retirement, higher than the popular 70-80% guidance. As part of our financial planning process at RSWA, we review long-term average historical and projected returns for stock and bond markets annually, from multiple sources, to develop future realistic return expectations. As part of an individual’s plan, we also review their spending closely to make sure it is sustainable and accurate. Counting on high stock market returns to save for retirement isn’t a plan. How to Keep This Hot Stock Market From Melting Your Retirement Dreams | WSJ
Government Shutdown: We’re watching and following the news around the potential U.S. government shutdown if a spending bill is not passed by October 1st. To pass a spending bill, the Senate will need at least 7 Democratic senators to vote alongside 53 Republican senators. There is talk among strategists to potentially force a shutdown, to force Republicans to come to the table: Democrats Embrace Government Shutdowns in Trump 2.0 | Axios.
The deadline could also be pushed to January 2026 with a stopgap bill: Trump Wants to Punt Shutdown to January | POLITICO
Financial Planning/Investment Strategy Corner:
Speaking of politics, it brings up one of the biggest biases and potential risks that exist for investors, and can damage investment returns or results based on actions taken. I recently sat through jury selection, where the goal of the court and judge is to eliminate (or reduce) perceived biases in the jury versus the defendant. It’s a several-hundred-year-old process (and it felt like it at times), but it’s a pretty effective attempt to reduce potential biases. For those who don’t know, it starts with being selected from a random sample of eligible jurors, short surveys and questions asked around events in the case, and then another random selection of the remaining pool of whittled-down jurors for the lawyers and judge to negotiate who will end up on the jury to hear the evidence during trial. Once I learned the process and while waiting (there’s a lot of waiting), I began breaking down the odds of my being selected for a jury. I then texted my wife to let her know the odds of my fate. She didn’t seem to care and said I sounded bored and offered up how long our child napped. Bias exists.
For investors, believe it or not, since we are human, we all tend to be irrational and biased about something. We can have cognitive biases, like focusing on recent events or having a selective memory, or emotional biases, like exuding overconfidence or regret. Here is a list of potential biases, but also how to account for them to overcome them in a decision you make: Learn About Biases | Schwab.
Quick Hits:
- If you liked the show Mare of Easttown, you’ll also likely like Task on HBO. Task | Official Trailer | HBO Max
- For Apple investors (most investors are, as it’s probably in an investment vehicle you own), the book Apple in China was a very interesting look into the company’s operations in China and how they became so entwined.
- The drought in Maine is impacting farmers of beef, apples, and corn, and reflects a larger weather pattern: Severe Drought Maine | WMTW Dry Year Cuts into Hay Crops | Central Maine
- Photographs of majestic lions: Gorgeous Photographs of Lions | Smithsonian Magazine
Quotes: A couple from Richard Thaler: “The purely economic man is indeed close to being a social moron. Economic theory has been much preoccupied with this rational fool.”
“What makes the bias particularly pernicious is that we all recognize this bias in others but not in ourselves.”
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