With the memory of a goldilocks still in the back in investors’ minds, this Friday’s payrolls data has somehow been demoted from critical import in the bull’s narrative (hey look over here at earnings growth…). However, as former fund manager Richard Breslow notes, that is a mistake traders should not make – Friday’s jobs data will still be a big event.
Via Bloomberg,
We live in a world that fixates on every economic release and then parses in minute detail the deeper meaning of every beat or miss. So it’s more than odd to hear a lot of people tell me this coming Friday’s non-farm payrolls report isn’t that big a deal. It’s understandable why that might be a popular opinion. But it’s wrong. These numbers are getting more, not less, important.
The argument runs something along the lines of “Ho hum. Another big print with no signs of inflation and therefore nothing to be learned here.” The dot debate to be continued as before. The flip-side is that we are here in bonds, equities and the dollar largely because of this continuing and confusing set of details. And few traders would argue that any of these markets look at all stable given current prices.
There is nothing in job growth running above 200k per month to be dismissive about. That’s an unambiguously strong result. And the rolling average has been increasing. This doesn’t look like a number hanging on by its fingernails to maintain the upbeat version of the “how’s the economy doing?” question.
But, given wages, hours worked and participation rates, traders need high job creation levels to compensate. Of course, there is always the possibility that the report’s “guts” do the heavy lifting this time around and then things could get very interesting indeed.
The economic debate stands at an unusual crossroad. You have people simultaneously talking about an economy overheating while others are waiting for the recession to hit. Like society in general, it appears there is no middle ground. It seems oddly simple for the mood to shift back and forth. And to send asset prices running to reprice accordingly.
Traders are struggling to take advantage of the long-hoped-for increase in volatility finally being seen. It isn’t that they are out of practice. Although, structurally, the institutions they work for probably are. But, rather, every issue — economic and, increasingly, geopolitical — takes on a finality that only lasts a very short amount of time. The chances that this number will be the exception are low. Especially depending on how close 10-year Treasuries are to 2.80% and the S&P 500 to its 200-day moving average.
And in keeping with what seems to be modern protocol, shortly after the release, Fed Chairman Jerome Powell will speak on the economy and tell you how to interpret what you just saw and interpreted.
Markets are no longer sated without at least two bites at every apple…
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