Revisiting Muddle Through

by John Mauldin of Mauldin Economics, 9/8/26

Revisiting Muddle Through

A Solid Labor Report*
Beige Book Blahs
The Bullish Argument
Trade Deficits and GDP
A Few Thoughts on Interest Rates
New York, DC, The Cleveland Clinic and More

It’s Labor Day weekend, and my goal with this letter will be to not interrupt your long weekend too much. But there are some things that are happening that are important. My basic thesis for quite some time has been that we are in a Muddle Through Economy, which I’ve always meant that to me the GDP will grow slightly south of 2% over time. For 25 years, that has been the case. Is it time to revisit the Muddle Through world? Let’s look at some of the data and try to get a feel for what the next few months and even quarters looks like.

A Solid Labor Report*

On its face, the BLS labor report today was quite solid. There are a few minor caveats that should be noted, but overall this was the best report we’ve seen in some time.

Quoting from Barry Habib at MBS Highway (source Morning Update) from his morning update:

“The Bureau of Labor Statistics (BLS) released its August jobs report, showing 162,000 jobs were created, well above estimates of 58,000. Adding to the strong report were positive revisions to the previous two months totaling 55,000. Notably, July was revised from a negative -23,000 20 positive +21,000, accounting for most of the revision.

“While today’s BLS report was strong across the board, it does not jive with the other labor market reports from ADP and Revelio. BLS includes government, so in order to compare apples to apples, we have to look at the BS private payroll figure, which was +127,000. That compares with +38,080 p.m. post 37,000 in Revelio - clearly some big disparities.

“Additionally, the BLS said there were 74,000 jobs created from the birth/death model, which tries to capture small business job growth that compares with zero job growth in small businesses in ADP.”

While most of the press and markets focus on the establishment survey, there were things in the household survey that were outstanding. From my friend Steve Moore:

"But the big number that jumps off the page is the return of the American worker. After many months of troubling declines in the workforce (one million missing workers) from the peak last year, in August we saw a complete reversal. According to the household survey, 683,000 more workers entered the workforce and 569,000 of them found jobs and started earning a paycheck. The labor force participation rate rose. Data center construction is one of the major drivers of new employment."

return american worker

This is a most welcome outcome. And with unemployment at only 4.1%, that bodes well. At some point we will get some serious analysis of how the large influx of illegal immigrants messed with the jobs numbers and now with both government and self-deportations, the number of workers in the US is dropping and it’s clearly, at least for this past month, finally showing up in the participation rate. That participation rate has been making a lot of us very concerned.

See more: Want the Fastest Read on the Economy? Watch These Interim Reports