There are plenty of economic releases this week. We have Manufacturing and Construction data on Monday, Factory Orders and Vehicle sales on Tuesday, and April Non-Manufacturing data on Wednesday; then we have Q1 Productivity on Thursday. It is know that manufacturing is vigorous, that anything to do with housing (construction) is not. Vehicle sales are important given gasoline prices. But it is Friday’s April Employment Report that is the key release by the way of market-moving horsepower.
It’s easy in this business to get lost in the details, and the noise provided by the media.
Background: On Mar/10 the Jobless Claims result exceeded expectations - more claimants, bad news - and worried the markets considerably. We told our clients that this was not trend and to adhere to that anchor. The following three Claims numbers cooperated (lower) as did the March Payroll result of Apr/1 - better than expected. On April/7 the Claims result again came in a tad south of expectations. With that, we closed this exercise, meaning we could no longer assign a risk to the jobs numbers; we had lost the "sweet spot."
That brings us to this Thursday’s Claims result and Friday’s Employment report. We cannot assign a risk of result to either (result vs expectations) but can say that the Payroll number especially carries far more potential to harm the market than to cheer it. This is because the market crowd expects an economic rebound from the reduced pace of Q1. A Payroll result at or a tad better than expectations will merely fit that view. A result inside of expectations, especially for private sector jobs, will be taken as a new trend, providing a worry to equities and a boost to bond prices.
We know that employers were cheered by results of Nov/2, further cheered as a new Congress quickly set about to make repairs. We know this, not from our own prediction, but from the words of key business leaders themselves, a chorus actually.
That change, and extended tax cuts together sparked US consumer spending, employment and spending then moving in tandem. We know spending will be slowed, near term, tagged to gasoline prices. We’re not sure regarding employment.
The exercise now is to come to understand reality ahead for both of these sectors.
Robert Craven
It’s easy in this business to get lost in the details, and the noise provided by the media.
Background: On Mar/10 the Jobless Claims result exceeded expectations - more claimants, bad news - and worried the markets considerably. We told our clients that this was not trend and to adhere to that anchor. The following three Claims numbers cooperated (lower) as did the March Payroll result of Apr/1 - better than expected. On April/7 the Claims result again came in a tad south of expectations. With that, we closed this exercise, meaning we could no longer assign a risk to the jobs numbers; we had lost the "sweet spot."
That brings us to this Thursday’s Claims result and Friday’s Employment report. We cannot assign a risk of result to either (result vs expectations) but can say that the Payroll number especially carries far more potential to harm the market than to cheer it. This is because the market crowd expects an economic rebound from the reduced pace of Q1. A Payroll result at or a tad better than expectations will merely fit that view. A result inside of expectations, especially for private sector jobs, will be taken as a new trend, providing a worry to equities and a boost to bond prices.
We know that employers were cheered by results of Nov/2, further cheered as a new Congress quickly set about to make repairs. We know this, not from our own prediction, but from the words of key business leaders themselves, a chorus actually.
That change, and extended tax cuts together sparked US consumer spending, employment and spending then moving in tandem. We know spending will be slowed, near term, tagged to gasoline prices. We’re not sure regarding employment.
The exercise now is to come to understand reality ahead for both of these sectors.
Robert Craven
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