In recent times, U.S. economic data has become a target of criticism, with the degree of division caused by it being no less intense than the polarization between the two major parties during U.S. elections. This division is evident across multiple aspects, an indication of the fragmentation of the American economy at various levels.

First, there is a clear split between different data points at the same time, particularly in the Markit Manufacturing PMI and Services PMI. According to data released by S&P Global on October 24, due to strong demand in the services sector, U.S. business activity maintained steady growth for most of October, with expectations of a rebound to the highest point in over two years. However, manufacturing has contracted for the third consecutive month, although the pace of contraction has slightly slowed. The preliminary October Markit Manufacturing PMI for the U.S. stood at 47.8, slightly higher than the expected 47.5 and the previous 47.3. Meanwhile, the preliminary October Markit Services PMI was 55.3, surpassing the expected 55 and the previous 55.2. Whether examining recent short-term data or the long-term decline of the Rust Belt since World War II, it is clear that the concept of a "financially-driven nation" has become more deeply entrenched in the U.S. This suggests a widening industrial divide, pointing to an underlying imbalance in the American economy.

Second, the same data, presented at different times, shows a clear divide, particularly evident in the ISM Non-Manufacturing PMI's "wild swings" around the dividing line of expansion and contraction. On November 5, the Institute for Supply Management (ISM) released data showing that the U.S. ISM Non-Manufacturing PMI for October was 56, the highest in nearly two years, well above the expected 53.8 and the previous September value of 54.9. A PMI above 50 indicates expansion, while below 50 signals contraction. The October reading significantly exceeded expectations, surpassing the forecasts of nearly all economists surveyed.

However, it is important to note that since the second quarter of this year, the U.S. Non-Manufacturing PMI has been quite volatile. In April and June, the ISM Non-Manufacturing PMI fell into contraction, while the data for September and October showed a noticeable improvement. The ups and downs of non-manufacturing data correspond with the Federal Reserve's major shift from maintaining a tightening cycle to initiating a loosening cycle with interest rate cuts. The data fluctuations have cleverly paved the way for rate cuts and later helped support the economic soft landing. On October 25, former Fed Reserve Governor Kevin Warsh openly stated in an interview with CNBC that the Fed's decision to cut interest rates by 50 basis points in September was at odds with its previous policy statements. Warsh raised concerns, "I do not want to be the person accusing them of politics. That’s not the central bank I know. But when you don’t have a theory and follow it, it’s easy to get that accusation".

Third, the same data type, presented by different institutions at the same time, shows a stark divide, particularly evident in the significant discrepancy in "non-farm payroll" data. On October 30, the ADP employment report showed that in October, U.S. companies hired at the fastest pace in over a year, indicating an extraordinary demand for labor. According to the latest data from ADP, U.S. private sector employment grew by 233,000 in October, far surpassing expectations. Additionally, the September ADP employment figure was revised upward from 143,000 to 159,000. The latest ADP data exceeded the forecasts of all economists surveyed by Bloomberg and was significantly higher than the 114,000 jobs expected by most economists. In contrast, on November 1, the U.S. Bureau of Labor Statistics (BLS) released data showing that non-farm payrolls in October had plummeted to just 12,000, a sharp decline from September's 254,000 (revised down to 223,000), marking the lowest increase since 2020, and well below the expected 106,000. While Fed "voting member" Christopher Waller and President Joe Biden's chief economic advisor, Lael Brainard, both indicated that this report likely reflected temporary job losses due to recent hurricanes and the Boeing strike, the BLS acknowledged in its statement that while hurricanes may have affected employment in certain sectors, the impact on overall U.S. employment, hours worked, or income could not be quantified. The BLS also stated that the hurricanes had no significant effect on the overall national unemployment rate. The stark discrepancy in important data, combined with conflicting views from data release agencies, the Fed, and government officials, highlights the significant differences in perspectives on the state of the U.S. economy.

Fourth, there is a divergence between history and reality, specifically reflected in the triggering of the Sahm Rule and the deviation of U.S. GDP growth. On August 2, data from the U.S. Bureau of Labor Statistics showed that the U.S. unemployment rate rose by 0.2 percentage points to 4.3% in July, the highest level since October 2021, and higher than the expected 4.1%. The increase in the unemployment rate triggered the well-known recession indicator, the Sahm Rule. Notably, historically, the Sahm Rule has been confirmed in all 11 U.S. economic recessions since 1950, without exception. However, data released by the U.S. Bureau of Economic Analysis (BEA) on October 30 showed that the U.S. GDP grew at an annualized rate of 2.8% in the third quarter, a slowdown of 0.2 percentage points from the second quarter, and below the economists' expectation of 3.1%. Still, the growth was better than most other developed economies during the same period. Economists also pointed out that while the growth rate slightly slowed compared to the second quarter, it remains relatively strong compared to historical trends. The differing perspectives between historical experience and current realities regarding economic development continue to resonate in the ongoing heated debate about whether the U.S. economy is headed for a soft landing.

Fifth, there is a divergence between data and personal experience, specifically reflected in the contrast between the decline in inflation data and the harsh inflationary pressures felt by ordinary people. On October 30, data released by the BEA showed that the Fed's preferred inflation indicator, the core Personal Consumption Expenditures (PCE) price index, rose 2.2% on an annualized quarter-over-quarter basis in the third quarter. This was slightly higher than the market expectation of 2.1%, but 0.6 percentage points lower than the second quarter. Subsequently, on October 31, data from the BEA revealed that the U.S. PCE price index for September rose 2.1% year-over-year, in line with expectations, marking the lowest level since early 2021. In contrast, starting in mid-September, U.S. dollar stores like Dollar General and Dollar Tree began to lower their sales forecasts and warned that their core consumers were under pressure, which caused their stock prices to drop sharply. Dollar stores, known for their low-cost, limited-product, and low-price business model, originally priced all items at a dollar and have long been a source of food and basic goods for low-income Americans. The sales performance of these dollar stores provides a clear indication of the real state of U.S. inflation and its impact on the consumption spending of middle- and low-income groups. The decline in cold, hard inflation data sharply contrasts with the dire economic realities faced by ordinary citizens. As ANBOUND’s founder Kung Chan put it, the current U.S. inflation data is unreliable; the base effect of the data masks the deeper underlying significance beneath the surface.

Overall, in recent times, the fragmentation of U.S. economic data reveals a deepening of the current multi-dimensional and multi-level divisions within the United States. Kung Chan has pointed out more profoundly that the objectivity and representativeness of U.S. data are now highly questionable. In the future, the use of U.S. data must be approached with caution, as the importance and necessity of understanding data have reached a very high level, making it almost inadvisable to use such data directly.

Final analysis conclusion:

In recent times, the fragmentation of American economic data reveals a deepening of the current multi-dimensional and multi-layered divisions within the United States. At the same time, there are significant doubts about the objectivity and representativeness of U.S. data. The importance and necessity of understanding data have reached a very high level, which means that the use of U.S. data must be approached with caution.

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Muren Jin is an Economic Research Fellow at ANBOUND, an independent think tank.