Notes From Underground: Friday is unemployment and we will need the patience of JOB

The unemployment data has become much more difficult to trade as the breakdown of information is filled with so much countervailing data. We need to look at the private sector job creation as the census jobs roll down, then the average hours worked because average hourly earnings take on more importance as an indicator of possible increased consumer spending. However, the overall jobless rate may stay the same or go higher. The consensus number for non-farm payrolls is 105,000 lost , but we caution to wait for the full breakdown before getting too excited.

The private sector jobs number will be far more important and the consensus job growth here is around 30,000-plus after a 70,000 job gain last month. After yesterdays rally in the equity markets, we sense that the market is looking and sensing less bad news. But we caution that the markets are thus susceptible to a large selloff and a bond rally if the jobs number were to be more negative.

The DOLLAR seems to want to go lower and tomorrow’s data will provide an interesting test. If the UNEMPLOYMENT was worse than projected and the S&Ps sold off without a DOLLAR rally in a risk-off scenario, then we’d believe that a sea change was taking place. Yesterday, risk on was the trade du jour with all the elements of that trade paradigm performing to algorythmic expectations. We are awaiting the breakdown of the risk on/risk off so we can begin adjust to an alternative trading pattern.

Rick Santelli raised an interesting question this morning on Squawk Box. What if Fannie and Freddie were to do a massive refinance on its portfolio? Santelli threw this out for thought and questioned what this would do to the entire yield curve. His bigger point was that this would provide the markets with some type of pre-election surprise and we concur with Rick that something is coming. We just don’t know what. If the giant REFI were to take place, we will have to judge the impact on the entire financial quilt. We await our readers’ views as we develop our own to prepare for this possibility.

We wait patiently for the Aussie election to resolve itself. If the Liberals can piece together a 76-seat coalition, it will be bullish the Aussie dollar as it will mean that the extraction tax will see its demise or be rendered toothless. The overall economic news out of Australia has been better than anticipated so the market’s uncertainty is preventing any further appreciation of the currency. The Aussie trade surplus was weaker than expected but we caution that commodity prices have firmed since then so we would anticipate a stronger number going forward.

Anecdotally, we make note of a report that BMW sales in the U.S. have out paced LEXUS for the third straight month. We know that this may be the result of Toyota’s and Lexus recalls but we note this only in reference to the EUR/YEN cross beginning to bite into Japanese exports. Our readers know that the DOLLAR/YEN  is little importance for Japan and the EUR/YEN of much greater significance. Just paying attention as the wheels of commerce adjust slowly to currency fluctuations.

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One Response to “Notes From Underground: Friday is unemployment and we will need the patience of JOB”

  1. John Treichler Says:

    We won’t have small business job creation or hiring until the Owners see product markets here in the USA into which they can expand without being underpriced by the multinationals and foreign businesses.

    Undercut because the Free Trade Act was provides Most Favored Nation Status to Countries, like China, that elect to recycle their company profits into our USA Treasury Securities.

    In order to give our small business Owners a “level playing field” we need a National Policy of “American Business First”, “Build/Grow it here if you want to sell it here”, Foreign Investors can keep the profits but the Jobs remain in the USA.

    Targeted tax cuts won’t enable markets here in the USA because these tax advantages can be neutralized by pegging in the currency markets. Further, Small Business needs markets and profits in order for Tax Incentives to be useful.

    Until we have honest commodity-based money that requires overall balanced country-country trade, we need to implement currency-pegging neutralizing Tariffs at a percentage appropriate to the currency pegging.

    ” There is no subject that can enter with greater force and merit into the deliberations of Congress than a consideration of the means to preserve and promote the manufactures which have sprung into existence, and attained an unparalleled maturity in 1 ‘ the United States. ” JAMES Madison.


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