Jobs Summit Delight!

Is the Non-Farm Payroll Report Believable?

 

The Bureau of Labor Statistics. BLS for short. Perhaps it should just be BS?

 

On the heels of President Obama’s “Jobs Summit”, the shockingly surprising NFP number reported showed not only a much smaller number of jobs lost (11K vs. an expected 125K) but also a revised figure from October to a drop (111K vs. 190K previously reported). I suppose this is one time that the media can use the word “unexpected” and actually be correct.

 

And while I’m not going to start conspiracy theories based on the extraordinary timing of this surprise number, it is rather comical to see all of the big smiles and back-patting going on today.  

 

Here’s a sobering thought: we’re not out of the woods yet.

 

While this figure is good news for the economy, it may mean bad news for the markets, particularly stocks and commodities. While high-priced commodities don’t really benefit the end-user, having a declining stock market (if that occurs) could be damaging to the economic recovery. The reason for this is that it may give Bernanke and the Fed a reason (besides all of the others they’ve been ignoring) to raise interest rates sooner than later.

 

A quick peek at the charts confirms our suspicion. Here’s a chart of AUD/USD which is emblematic of the risk-taking trade:

 

 

The market’s initial reaction was to bid up this pair as the risk-taking trade seemed to be the play of the day. When things are going well here, investors seek out additional yield if they believe things are getting better or stabilizing.

 

But then, the pair sold off as investors realized that this could mean rate hikes here in the US. I detailed this in a previous article and mentioned that one of the things holding back Bernanke was the employment numbers. If these numbers continue to improve going forward then he could be forced to act more quickly then he may have liked.

 

He was taken to task at his re-confirmation hearing so perhaps the coincidental timing of this NFP figure will allow him to save face AND reverse the path to dollar destruction he was following. 

 

And while the markets may sell off in the short-term, I think this bodes well in the longer-term. Let’s get the markets back to trading on the fundamentals, and not on anti-dollar sentiment. Savers have been punished long enough, and those who acted poorly have had ample time to rectify their misdeeds.

 

Now let’s just hope these numbers are real, and not just waiting for yet another revision down the road. Now that doesn’t make for a good photo op!

 

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