Notes From Underground: Unemployment Friday and the market has built in huge expectations

Friday brings the May unemployment report. The consensus jobs number is for 500,000-plus on the NFP, a 9.8 percent jobless rate and average hourly earnings to rise 0.1 percent. The headline number will be difficult as we will have to factor out the census hiring, but we will wait to decipher construction and manufacturing as being very important.

April’s number was an upside surprise and we had a key to that because ¬†President Obama was going to speak two hours after the release. Why would a speech be planned for bad employment data? We haven’t heard if the president plans on another speech post-release, but pay attention because it may well presuppose a blow-out number. More importantly, watch the Canadian unemployment number that comes out at 6:00 a.m. CST. This number has been a precursor to the U.S. data as the two economies are so closely tied. Last month’s number was a blowout to the upside so we will be carefully weighing and looking for further robust growth from the North Country. The market is looking for an almost-17,000 jobs gain and an unemployment rate of 8.1 percent.

We would surmise that a gain on the order of last months 100,000-plus would be a positive for the U.S. If the data is better than expected, look for the DEBT markets to probably sell off, but with the FED on hold it could be a day of break and rally. The September Eurodollars, we think, will be a good barometer of overall market sentiment as with a strong number a EURODOLLAR rally would signal that the recent nervousness in the LIBOR markets was easing. (A robust jobs number with a rally in the nearby Eurodollars would lead to an Equity rally.) That is where we will be looking for guidance. Prepare yourselves accordingly.

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One Response to “Notes From Underground: Unemployment Friday and the market has built in huge expectations”

  1. jeff Says:

    how long before we are spending deutschemarks in Germany?

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