3 Theories for Why G.D.P. Is Up but Job Growth Is Slowing

Opinion|Economic Growth Is Up. Unemployment Is, Too. What’s Going On?

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 were 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.