| Index | Close | % Change |
|---|
| Dow | 37695.6 | 0.45 |
| Dow Transports | 15602.87 | 0.58 |
| Dow Utilities | 899.39 | -0.11 |
| S&P 500 | 4783.44 | 0.57 |
| Nasdaq | 14969.65 | 0.75 |
| Nasdaq 100 | 16793.04 | 0.69 |
| Russel 2000 | 1963.77 | -0.22 |
| VIX Index | 12.71 | -0.39 |
| 10 Year Gov't Yield | 4.04 | 0.66 |
| Spot Gold | 2023.69 | -0.32 |
| Spot Silver | 22.88 | -0.43 |
| GDX-Gold Miners | 29.11 | -0.21 |
| Crude Oil | 71.28 | -1.32 |
| Dollar Index | 102.43 | -0.13 |
| Euro Spot | 1.1 | 0.33 |
| Japanese 10 Year | 0.61 | -3.16 |
| Shanghai SE | 2877.7 | -0.54 |
| Long Bond 20-year | 122 | -0.33 |
|
A Few Words on Employment Data
01-10-2024Before we get into the market action, I want to share some commentary written by a friend of mine who is very good at analyzing the economy. In particular, this analysis centers on last Friday's nonfarm payroll report and by extension employment growth in general. Furthermore, it's a topic that will matter not only to the economy in terms of a recession, but also may be the key to disrupting the passive bid, which would really roil financial markets. Thus, I think employment is a worthwhile data series to keep an eye on, even though the nonfarm payroll data is very poor as far as its real-time accuracy is concerned.
Learning to Ride a Noncycle
My friend begins: "For example, in 2023, the U.S. economy added 2.7 million new jobs, but 1.7 million of those new jobs were concentrated in noncyclical industries including private education, health care, and government. In other words, 64% of the job creation last year came from noncyclical industries that employ only 31% of Americans. The industries that employ the remaining 69% of Americans only created 974,000 jobs, an extraordinarily weak monthly average of 81,000 which the leading employment indicators forewarned about.
"The government sector alone added 672,000 jobs last year, the highest single-year job growth since 1966 and the third-highest annual employment increase since records began in 1939. In December, employment growth in private education, health care, and government sectors were rising 3.7% y/y whereas employment growth in the rest of the economy had slowed to 0.9%, a level consistent with recessionary environments."
He continued: "Last year, 443,000 jobs were revised away after the initial jobs report, which is the largest downward revision outside of a recession we have ever seen. Unfortunately, this may be a new norm because BLS establishment survey response rates have sunk to historic lows at just 34% compared to a pre-pandemic average of 69%.
"When response rates are this low the BLS is forced to 'model' the monthly nonfarm payroll estimate using incomplete source data and because the economy is usually in an expansion, they overestimate employment growth at cyclical turning points in the economy. Eventually, as surveys get mailed in late and the Census Bureau updates their population surveys, the data gets revised to a more accurate number."
Weak Support for Strong Numbers
He then concluded: "It's uncertain how much longer noncyclical industries' employment growth can offset weakness in the rest of the economy forestalling a recession. What is more certain is those investors focused solely on the headline payroll gain of 216,000 in December are adding too much risk to their portfolios."
Turning to the market action, the indices were very slightly higher through midday. In the afternoon, they gained a bit more ground but closed well off their highs.
Away from stocks, green paper was a touch weaker while fixed income was slightly higher. The metals were once again higher overnight and then weaker in New York, with silver losing 0.5% and gold a bit less. The miners were mixed, but most were very slightly higher.
Tomorrow's CPI report appears to be a focus of speculators. I can't really imagine that whatever the "number" is that it will move the needle very much in terms of whatever the Fed has planned, but that doesn't mean we won't get lots of motion on the back of it.
Come to Think of It
The annual roundup of "Fleck's Thoughts" from 2023, kindly curated by a longtime reader, has been posted. There are also links to this and all previous posts in the Fleck's Thoughts section of the home page.