The unemployment rate ticked down to 7.4 percent last month, despite less-than-expected job growth. That's just an initial report, but there may be good reason to take it to heart.
Economists typically warn against reading too much into initial reports such as today's because they are often subject to big revisions as more data are accounted for. But in recent years, initial reports have been unusually accurate, according to Deutsche Bank economists.
"[T]he initially reported payroll readings have been about as stable as they have been for any time in the last 30 years—we have to go back to 1984 to find such a period," they wrote in a note yesterday. The June employment gain of 195,000 jobs, for example, was revised down just 7,000, according to Friday's report. The May gain of 195,000 jobs, however, was revised down to 176,000.
The recent trend, though striking, won't likely persist, they said.
"We believe this will eventually change, because we can also see that history shows periods of relative stability in monthly payroll changes invariably give way to periods of instability."
Here's their chart of the volatility in the initial reports:
NOTE: For those interested, here is the methodology they used to calculate volatility: "The series was created as follows: we took the standard deviation of the monthly change in nonfarm payrolls along with its three-, six-, nine- and twelve-month moving averages."