An alternative take on the employment numbers

I posted a quite bearish piece on Saturday morning, after some dreadful Non-Farm Payroll numbers, so today an alternative view. Probably more accurate to say that these are alternative views of the economy rather than alternative views on the NFP number, which pretty much all agree was dreadful. OK, lets go.

The Bonddad blog is a good, data-driven source:
Saturday, July 9, 2011
Weekly Indicators: Stall vs. double-dip edition

http://bonddad.blogspot.com/2011/07/weekly-indicators-stall-vs-double-dip.html
This review of the week’s data leads to a conclusion that we are likely still in a ‘slowdown’ rather than the precursor to a recession, but an important caveat:

As of now, both the LEI and the weekly indicators show only a slowdown or stall. It will probably take true idiocy from Washington to push us into a significant contraction. Which means, unfortunately, it remains a significant possibility.

And from one of my favourite sources, A Dash of Insight, also data-driven. Jeff Miller links to quite a few sources that have pulled apart the employment figures (those from the BLS and many others) and provide compelling evidence that the US economy is indeed in a slow patch but not entering a recession. A must-read.
July 09, 2011
Weighing the Week Ahead: All Eyes on Earnings

http://oldprof.typepad.com/a_dash_of_insight/2011/07/weighing-the-week-ahead-all-eyes-on-earnings.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2FWuQQ+%28A+Dash+of+Insight%29

OK, now eagle-eyed readers will have compared the post on Saturday (the link to the UBS analyst) with today’s post and noted a key difference. The UBS post started with the headline: After careful consideration, I remain bearish (http://www.creditwritedowns.com/2011/07/lees-economic-data-bearish.html?utm_source=feedblitz&utm_medium=FeedBlitzRss&utm_campaign=creditwritedowns ), and ended with:

The S&P has gone from 2 standard deviations below the 20-day moving average on the 16th June to 2 standard deviations above it now, something it did prior to the 87 crash when it rallied 6.4% in the week prior to the crash. It has been doing this more and more frequently recently although not of the scale of swing we have just seen. Our economists have already said that a single payroll figure is not sufficient to cause QE3 to which I agree. Commodity prices are telling us that further Asian stimulus is not going to happen unless offset by demand destruction elsewhere in the world.

The risks are clearly mounting up.

Now, while this is not clearly stating “the market is going to fall now”, it is nevertheless saying that the market is likely headed for a sustained fall from here or soon.

Whereas, the sources I have quoted from and linked to today have not given a short-horizon market call, these are discussions of the economy in the US. Now, while today’s authors are not bearish on the economy, but net bullish (albeit not expecting anything rip-roaring, just more of the same low-positives grind) these sources have not made a call on the direction of the markets. We (that’s you and I, reader) may very well draw a market-direction conclusion from these articles, but if we have drawn that conclusion its wise to keep front-of-mind that its our conclusion. I don’t know about you guys and girls, but I look at more than just the expected direction of the US economy (although it is an important input) for my conclusions on short-term market direction.

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