Economic Reports Scorecard
The response to the much better than expected employment report today is quite interesting although not in a good way. Stocks will surely get most of the attention, assuming they continue to trade higher by the end of the day (they did), but other markets – bonds and gold – are not confirming the strength of the report. I don’t know when the divergence between bonds, stocks, gold and commodities will be resolved but it would seem that at some point it must. There are so many cross currents at this point – Brexit and the rest of the European problems, a US election in less than six months with nary a decent candidate in sight, central bank interventions, negative interest rates and QE, China slowing, Japan being Japan – that the confidence level in any forecast must be near zero. We know the Fed is bad at forecasting and now because the world’s central banks are so active I am starting to doubt the forecasting ability of the market itself.
Notice I said the response was interesting not the report. The report itself not so much; it has to be taken in context. It is only one month and the trend this year has been down. The monthly average for the second quarter was 147,300 versus 195,700 in a very weak Q1. And that was down from the previous year. There were some interesting tidbits: those working part time for economic reasons dropped considerably to name just one. So, yes it was good but in the big picture, one month amounts to so much noise. For a more complete view of the big picture employment situation, read Jeff Snider’s take here.
The other data released since the last update was again fairly weak with a few strong reports sprinkled in – although most of those were survey based, anecdotal type reports. So we got a weak personal income and spending report – hard data or as hard as it gets with this stuff – offset by a rebound in the manufacturing ISM, a survey of purchasing managers. We have a big jump in the Chicago PMI offset by a surprisingly weak construction spending report. We get a rebound in the non-manufacturing ISM after a weak factory orders report. We get auto sales down 4.5% and the aforementioned employment report. When we look at things overall, not much has changed. The US economy continues to weaken – slowly – but is not in recession – yet.
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