Click to add text, images, and other content
Shortly after dawn on most weekday mornings, a strange ritual takes place in Washington D.C. Two dozen select men and women leave their homes, grab their newspapers, and rush off to spend part of the day under virtual house arrest. Yes, house arrest—as in incarceration. Precisely where they go to be confined can vary day to day. It could be in a dilapidated government building one morning and a high-tech office complex the next. Regardless of the location, what occurs in all these places is always the same. They enter a strict, prison-like setting where contact with the outside world is cut off.
One Friday morning, this same group climbs a long set of steps to the side entrance of a sleek, white-stone building on 3rd Avenue and C Street in the heart of the nation's capital. Armed guards greet them at the entrance for a security check; from this point on, everyone has to wear their ID tags at all times. The visitors proceed across a lobby, down a quiet narrow corridor, eventually stopping in front of a locked, heavy wooden door. A government official awaits them and quickly opens the door to reveal a drab, windowless, L-shaped room 40 feet long and some 10 feet across. It is empty except for two dozen plain-looking orange and chrome chairs, each resting alongside a row of narrow cubicle-like desks. A digital clock that rests high on the wall breaks time down to seconds. It is 7:30:15 a.m., and already 12 people have found their way into the "lock-up" room. More are expected within the next 15 minutes. All who enter dutifully sign their names on a special sheet.
Despite its austere appearance, there is an atmosphere of calm in the room, at least for now. Some visitors talk excitedly about the previous night's televised basketball game. Others are either chatting on cell phones or checking their Palm Pilots for messages. A few keep to themselves by catching up on the morning paper or downing a quick muffin and coffee. Everyone in the room, however, makes a point of always knowing the time, with some people eyeing the digital clock so frequently that their actions may be mistaken for nervous tics.
As the time approaches 8 a.m., there is a palpable change in mood. Gone now are the sounds of light conversation; these sounds are replaced by the din of laptops firing up. Everyone appears to be focused on what is about to occur.
At 7:55 a.m. sharp, a government official walks in and picks up a wall phone to call the Naval Observatory, home to the Vice President of the United States. It is also the location of the ultra-accurate atomic clock. She listens intently for a few seconds and then abruptly hangs up without saying a word. The individual then inserts a key into a lock on the wall, which allows her to adjust the digital clock to the precise second. With the correct time now set, the official then turns around to make a terse announcement.
"Please turn off all cell phones and Palm Pilots, and disconnect laptops from your telephone lines."
To make sure everyone complies, the official walks across the room and eyes each desk. Meanwhile a second federal employee arrives carrying copies of a highly sensitive government report. Each one is placed facedown on an empty desk.
Then it begins.
At precisely 8 a.m., the door to the lock-up room clicks shut. From this point on, all those inside are out of touch with the rest of the world. No one is permitted to leave. No calls or messages can come into or out of the room. Security is tight. A guard stands by outside, ready to use force if anyone attempts to sneak out.
What secret is the government protecting? Is the CIA about to begin a classified briefing on intelligence activities? Are Congressional investigators huddling to hear the newest terrorist threat? No. All these precautions are taken for one reason. The government is about to release numbers. Statistics. More precisely, economic statistics. The visitors in the room are business reporters representing news organizations from around the world, and this morning they're working out of the Department of Labor's secure press room.
Why such tight secrecy? Because in the next few seconds, these journalists will be the first to lay their eyes on one of the country's most sensitive economic measures—the monthly report on employment conditions. It can shed fresh light on whether the U.S. economy is growing or facing a slowdown. Did the number of Americans who have jobs rise or fall in the latest month? Have hourly wages gone up or did they drop? Did people work more hours or less? These statistics might not seem particularly earthshaking to most Americans, but they can and do whip the global stock, bond, and currency markets into a frenzy. For individual investors and professional money managers, the information in the jobs report can mean the difference between having a winning or losing portfolio. It also explains the need for the security measures. Individuals getting such hot figures ahead of time can make a quick bundle of money because they know something of which no one else in the financial markets is yet aware. To prevent such abuses, the government guards these and dozens of other key economic indicators as tightly as a military base. It also implements a carefully controlled procedure to disseminate sensitive economic news.
8:00:00 The instant the door is shut, reporters dive in to grab the latest release on employment conditions, which up to now had been facedown. They have just 30 minutes to read, digest, and write their stories on how the job market changed during the previous month. Most of the journalists arrived that morning with the expectation that the employment release would carry dismal economic news, with the number of people without jobs rising—a troubling sign the economy was weakening. At least that was the opinion of most professional forecasters whom these reporters consulted just days earlier.
But on this particular morning, the employment report stuns everyone. Those in the lock-up room read with amazement that companies actually hired workers in far greater numbers than anyone expected. Moreover, other figures inside the report appear to corroborate signs the economy is doing quite well. Wages are rising and factory overtime is increasing. Far from slowing, the latest evidence indicates the economy is actually picking up steam. It is astounding news of which the rest of the world is yet unaware.
As the digital clock continues its silent countdown, reporters working on the story suddenly face some urgent questions. What's really happening in the economy? Why were so many "experts" caught off guard? What does this mean for future inflation and interest rates? How might the stock, bond, and currency markets react to the news?
Though the latest jobs report was unexpected, these journalists are not completely unprepared. As is their routine, a day or two earlier they showered private economists with questions that covered a variety of hypothetical employment scenarios. What does it mean if the job market worsens? What if it actually improves? Now the reporters are frantically searching through their interview notes to help them file their stories.
8:28:00 A Labor Department worker in the lock-up room notifies television reporters that they can now leave under escort to prepare for their live 8:30 broadcast of the jobs report.
For the remaining journalists in the room, there is just a brief warning: "Two minutes left!" By now, most have pieced together their initial version of the story—the headline, the opening sentences, key numbers, and the implications for the economy. All that's left are some last-minute fact checking and a word tweak here and there.
8:29:00 "One minute. You can open your telephone lines—BUT DO NOT TRANSMIT!"
The level of tension is not just high in the lock-up room, for at that moment, money managers and traders in New York, Chicago, Tokyo, Hong Kong, London, Paris, and Frankfurt are riveted to their computer screens, anxiously waiting for the release of the crucial jobs report. It's a stomach-churning time for them because investment decisions that involve hundreds of billions of dollars will be made the instant the latest employment news flashes across their monitors. Why such worldwide interest in how jobs fare in America? For one, many foreign investors own U.S. stocks and bonds, and their values can rise or fall based on what the job report says. Second, the international economy is now so tightly interconnected that a weak or strong jobs report in the U.S. can directly impact business activity in other countries. If joblessness in America climbs, consumers will likely purchase fewer cars from Germany, wine from France, and clothing from Indonesia. In contrast, a jump in employment means households will have more income to spend on imports, and this can stimulate foreign economies.
8:29:30 "Thirty seconds!" The fingers of reporters hover over their computer's Send button, ready to dispatch the latest employment news to the world. On-air reporters are also prepared to deliver the news live.
8:29:50 An official counts the final seconds out loud.
"Ten . . . nine . . . eight . . . seven . . . six . . . five . . . four . . . three . . . two . . . one!"
8:30:00 "Transmit!" Reporters simultaneously hit the Send buttons on their keyboards. In seconds, electronic news carriers, including Bloomberg, AP, Reuters, and Japan's Kyodo News, release their stories. Television and cable news stations, such as CNBC, Bloomberg TV, CNN, and MSNBC broadcast the report live. A second or two later, computer screens around the globe carry the first surprising words: "Jobs unexpectedly rose the previous month, with the unemployment rate falling instead of rising!"
For journalists in the lock-up room, the stress-filled half-hour grind is over, and they are now free to leave. But the work has just begun for those in the investment community.