Headlines make it out to be worse than it actually was, but the fact is the 88,000 gain in payrolls that we saw on Friday was a good result. How? Because it follows a 268,000 lift in February.
Yep, it was the weakest result since June last year and all that. But as I have highlighted to readers many times, numbers bounce around and there is no use being like an economist and/or policy maker and panicking every time they do. One print doesn’t change a trend. The broader picture is still good and we’re talking an average jobs gain of 175,000 per month since the middle of last year, and that has barely changed over the last three months to 170,000.
Don’t forget there is also a tendency for numbers to get revised up. Otherwise the unemployment rate fell modestly to 7.6 per cent from 7.7 per cent, while hours worked rose slightly along with earnings per hours. Not bad all up.
That stocks slumped on the data is a great surprise then. We’ve been here so many times before I would have thought markets would be more resilient to ‘disappointing’ US jobs data. I don’t even think it was that hard to pick that the numbers would be ‘disappointing’.
That said, stocks in Europe were smashed and the Dax fell 2 per cent, the CaC was off 1.7 per cent and the FTSE100 was off 1.5 per cent. US stocks followed the same path initially but had the benefit of a solid bid into the close. So they were down 1.3 per cent at the low – the S&P finished 0.4 per cent lower, the Dow was off 0.3 per cent and the Nasdaq 0.7 per cent.
Otherwise bonds rallied, with the US 10-year yield falling about 5 bps to 1.71 per cent. The Australian dollar is down about 60 pips to 1.036 while the yen weakened quite a bit to be at 98.29. Commodities were mixed – gold up $23 ($1575), copper falling 0.2 per cent as well as crude, down -0.6 per cent to $92.7.
It’s not going to be a great start to the week then, but if the SPI is any guide it may not be too bad today. SPI was down 0.1 per cent.
It’s really quite hard to tell – every year, around the same time, bearish elements return with the same old rubbish. The three-track CD – it’s truly bizarre.
Anyway, apart from that we do get some important data for Australia this week. Employment on Thursday (1130 AEST) is the key release, especially after the excitement caused by the 70,000 surge in jobs we saw last month. Now recall most economists, who had been forecasting a 6 per cent unemployment rate by now (currently 5.4 per cent) sprang up to denounce the numbers: "Lies!" they shrieked. Their bloodcurdling howls could be heard thought the jungles of Sumatra. Writhing, they ground their teeth, screeched with rage: "The numbers cannot be trusted, the labour market is weak".
Alas, the unemployment rate is still very low, many years after these economists first hissed about our weak economy. Similarly, jobs growth has been consistent with trend economic activity for a long time. We can only pity these wretched souls, who have thrown themselves into their own forecasting hell.
The key message being missed is that the labour market has actually held up quite well. So maybe 70,000 jobs weren’t created last month. But jobs didn’t fall and not every job increase can be a lie. It would be nice if said economists pointed out the flaws of the survey when we see jobs falls of 20,000 or 30,000. Many don’t. Maybe we’ll get some correction this month. A fall of -30,000 or so would be quite reasonable following that spike, although the median is only for a fall of 7500, so I suspect there is a bit of downside to that forecast as a result. The unemployment rate itself is forecast to remain unchanged at 5.4 per cent.
Prior to that we see National Australia Bank's business survey for March on Tuesday at 1130 AEST – business conditions and confidence are still quite weak, but it’s not clear what that is capturing. That the Gillard government is one of the most unpopular this country has had is quite clear. That the party hierarchy is oblivious to that is equally clear. That is of course weighing on confidence: policy blunder after policy blunder does nothing to inspire the citizenry or business.
Residual concerns over the global economy? Hard to say – there had been so much improvement lately you would have expected a vast improvement. High Australian dollar, except that the country is benefiting more form it than anything. Foolish economists running around saying how bad things are? Possibly, possibly – and certainly our central bank’s panicky attitude hasn’t helped business either. End of the mining boom, people! Here's how it goes:
Capitalist business persons looking for a hit of corporate welfare: “Things are really, really, really, really bad – the government should do something.”
Reserve Bank of Australia: "We know, and the outlook is terrible as well. Let’s slash rates to record lows."
We’ll see what consumers think when we get Westpac’s consumer confidence survey on Wednesday (for April). Here confidence has picked up since the world didn’t end as economists forecast and the Reserve Bank stopped slashing rates. All good.
Abroad, there is lots of data and I won’t cover it all here, but keep an eye out figures from China – including inflation on Tuesday and trade data that night or Wednesday.
For the US, we see the Fed’s minutes, lots of Fed speak and then retail sales on Friday night.
Have a great week…
Adam Carr is a leading market economist.
Follow @AdamCarrEcon on Twitter.