Nearly every weekday morning, two dozen journalists leave their homes to be locked up in some windowless room in Washington, D.C. The location varies at random. One day they might find themselves in an old government building that has seen its glory days pass it long by. The next day they might find themselves locked away in a massive, towering, high tech office building. No matter where they find themselves, they always go through the same ritual. They walk into a room and have the door shut and locked to cut all ties to the outside world.
Today, this set of elites walks their way across a courtyard surrounded by towering, contemporary office buildings. When they reach the entrance doors, they find themselves before armed guards who check them in and require that each and every one of them wears an ID badge at all times while inside the building. Today’s elites walk across marble floors passing by giant columns of granite stopping in front of a dual set of elevators in the heart of the building. Thirteen men and women pile into the elevators to be carried up 20 floors where they meet a government official that opens a door into a windowless room measuring 60 ft. long by 20ft wide by 15ft tall lined with cherry bookshelves. In the center of the room, there are two giant cherry conference tables pressed together at the ends. The tables are surrounded on all four sides by oval, charcoal clothed chairs with brushed nickel legs. Up on the wall is a black triangular housing laid against half inch thick glass with red digital numbering in the center reading the time as 7:28:47 a.m. Each of the thirteen immediately sign their names to an official registration book bound in black leather. Over the next 16 minutes more people will find their way into the room.
Despite the stuffy traditional setting of the room, the postures of those in the room show a relaxed informal air. A few of today’s visitors shuffle papers around. A few more have opened the morning’s newspaper, and the remaining members of the group sit around talking about last night’s football game. No matter what any of the room’s occupants are involved in, they look frequently up at the clock. As the digital clock nears closer to 8 a.m. more people shuffle into the room.
Once the clock crosses 7:52:33 seconds, it is hard not to notice a change in mood. No longer do you hear the pages of newspapers turning or the muddled sounds of conversations of the night before. The previous sounds are replaced with the sounds of laptops opening and booting up. The whirls of the fans firing up and echoing off the walls makes it sound as though one is taking a tour of a manufacturing facility.
At precisely 7:55:00 a.m., the government official that greeted the visitors walks over to the east wall and picks up a phone receiver in an effort to dial the Naval Observatory, location of the atomic clock. She listens for a moment and then hangs up. She then inserts a key into the clock and adjusts the reading to the exact second. After completing this task, the individual makes a strong request, “Please turn off all cell phones and communication devices, and make sure you disconnect your laptops from your telephone lines.” In accordance with protocol, the government official walks around the table to assure that everyone in the room complies with her request.
During the government official’s inspection, a second federal employee walks into the room followed by an armed guard. In his arms, he carries a very sensitive report that until today has been protected from all unofficial eyes. He places each of the copies face down on the conference table in front of the visitors.
At exactly 8:00:00 a.m., the door to the room is locked and from this point on, everyone inside is completely cut off from the rest of the world. Not a single soul is allowed to leave the room. The phone line located on the east of the room is unplugged from the receiver and no messages are allowed to come in or go out of the room. The armed guard that arrived with the government official waits outside prepared to use force if anyone attempts to exit.
What is all the fuss about? What is it that the government is protecting so dearly? Is the CIA about to make a briefing on classified, top secret activities? Could it possibly be the case that the reporters are actually investigators huddling to hear of the newest terrorist threat and the plans of how to intercept the operatives? Are the members of the room being briefed on the location and time of the President’s daily press release? The answer to all of these questions is no. All of these security measures are being taken for a single reason. The reports before the journalists are economic statistics.
Why go through such measures to keep the numbers in the report secret? The simple answer is that what lies before the journalists are the United States most sensitive economic measures. It is a report of employment conditions. These numbers can shed light on whether the U.S. is headed for a recession or if the economy is posed to boom increasing inflationary fears. The questions answered in this report are; how many Americans have jobs, and did the number rise or fall, have hourly wages increased or declined, and are the total number of hours worked higher or lower than the last period. To many, these stats may not seem all that meaningful or important, but they have the potential to begin a whirlwind of activity on the global stock, bond and currency markets. For many countries’ investors and money managers, these numbers can mean the difference in gaining or losing sums reaching into the high billions. The impact on the financial and credit markets explains the need for the security measures. Individuals getting their hands on this data before release can make a quick fortune, because they know important information that no one else in the markets knows. In the attempt to prevent such abuse, the government guards these and dozens of other indicators in the same manner as they do for the development plans of a new top secret aircraft or the general’s battle strategy during a war.
The second the lock on the door clicks, reporters grab their copy of the report and now have 30 minutes to read, break down, and compose their articles. Along with the rest of the world, most of the reporters arrived expecting a bearish report chalked full of bad economic news, with jobless claims rising, hours worked down, and possible decreases in wages earned. These are all a troubling sign that the U.S. economy is slumping towards a recession. Well, that is what the professional forecasters whom all of the reporters had consulted only days before.
Yet, contrary to everyone’s expectations, today’s report shocks everyone in the locked up room. Finding that the once again resilient U.S. economy had companies hiring workers in far greater numbers than any of the forecasters had expected. Included in the extraordinary report was that wages had risen and factory overtime had pickup. These numbers are signs of an economy far from slowing, as they are all signs of a healthy expansion of the economy.
As the clock counts down the reporters face some difficult to answer questions like; what’s really happening with the economy, why were all the expert forecasters caught off guard and unable to predict this outcome, what does this data mean for interest rates and inflationary risk, what activity will this information spur in the financial and credit markets. Even though the report is a surprise to all the journalists who spent the days prior to this report asking economists about hypothetical situations like what if the job markets have gotten worse than expected or what happens if the job market has improved. Now the reporters are finished reading the report and taking notes, they madly shuffle through their notes from the previous days. The noise of papers rustling is reminiscent of the days of novelists clattering away on typewriters to type out a few words, then stopping and crumpling up the paper that had been typed on and throwing it at the waste basket.
At 8:28:00 a.m. sharp, the Labor Department employee unlocks the door and announces that the television reporters may now leave in preparation for their 8:30 a.m. broadcasts. The television reporters are followed by guards in an effort to assure that they do not transmit their stories early. The remaining reporters in the room take this announcement as a warning that crunch time is upon them. They race to get the last bit of their stories organized and the wording and facts checked.
A federal employee aggressively states, “One minute left. You can now open your phone lines, but do not begin transmission!” The level of tension in the room is very high, but not nearly at the level it is for, money managers and traders in New York, Chicago, Tokyo, Hong Kong, London, Paris, Frankfurt, and Beijing. Everyone in the financial world is nailed to their computer screens with teeth gritting anxiously in anticipation of the release of the ever so very crucial jobs report. For those sitting staring at their computer screens, it is one of the most stressful moments encountered, because decisions that involve hundreds and hundreds of billions of dollars will be made the instant the employment numbers flash across their computer screens.
Why is the world so concerned with the latest employment report? Many foreign investors hold U.S. stocks and bonds. Furthermore, the world has evolved into an international economy where a weak job market report in a nation like the U.S. can impact business practices and revenue of other countries’ companies. If the jobless in America climb, it likely means fewer German automobiles will be purchased, or U.S. consumers will skip buying new clothing produced in Indonesia. On the other side of the coin, an increase in employment, wage increase, or a jump in overtime increases disposable income that can be used to purchase a plethora of imports thereby stimulating foreign economies and possibly causing inflationary pressures.
“Thirty Seconds!” Reporters fingers typing away at their keyboards sounds like a tropical rainstorm beating against a tin roof, and then almost as quickly as it all started, there is an eerie silence as the reporters fingers hover over the send button waiting to deliver the news live to all those sitting and staring at their computer monitors with stomachs turning.
At 8:30:00, the members in the room hear, “Transmit!” Simultaneously every reporter hits their send button, and every electronic news carrier like Kyodo News, AP, Reuters, and Bloomberg release the stories. All the cable and television news stations like CNBC, CNN, MSNBC, and Bloomberg TV, broadcast their stories live all over the world. Not more than 5 seconds later, computer screens across the globe in financial high-rises and on trading floors flash across the top with “Jobless Claims Decline and New Company Hires Unexpectedly Rise.” For the journalists previously incarcerated, the pressure cooker burst open giving them relief, but for the investment community the work has only just begun.
Thank you for reading my first blog post of a series explaining the interworking of the economy and how different economic indicators affect the global economy. Please feel free to comment and give me suggestions on how I can make the reading of this blog a more pleasant experience.
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