Non Farm Payrolls

What can be said? Rinse, repeat, rinse, repeat.

Everyone basking into the market truce provided by Super Mario. And taking some easy time off… 

Friday afternoon Periphery squeeze barn stomp

Europe took August off. Today, it is America's turn, as the country celebrates Labor day, although judging by recent trends in the new 'Part-time" normal, a phenomenon we have been writing about for years, and which even the NYT has finally latched on to, it would appear the holiday should really be Labor Half-Day. After today the time for doing nothing is over, and with less than one month left in the quarter, and trading volumes running 30% below normal which would guarantee bank earnings in Q3 are absolutely abysmal, the financial system is in dire need of volume, i.e. volatility. Luckily, things are finally heating up as the newsflow (sorry but rumors, insinuations, innuendo, and empty promises will no longer cut it) out of various central banks soars, coupled with key elections first in the Netherlands and then of course, in the US, not to mention the whole debt-ceiling/ fiscal cliff 'thing' to follow before 2012 is over. So for those who still care about events and news, here is the most comprehensive summary of the key catalysts over the next week and month, which are merely an appetizer for even more volatile newsflow in October and into the end of the year.

Expectations were +100,000, NFP prints at 163,000K. Goodbye QE in 2012.

While Knight's algos will be focusing on the headline number and furiously calculating if [X AS PRINTED] is < or > than [X AS EXPECTED] and simplistically moving the market up or down accordingly, without regard for quality or compoisition (they don't call it the Part-Time Non Farm Payrolls for nothing), another key swing factor in July will be the seasonal adjustment. As a reminder, as the chart below shows, in July we experience a major swing event. While in June, seasonal factors typically subtract about 1 million from the headline non-seasonally adjusted headline number, in June we invert, and instead of subtracting, seasonal factors for the first time since April "add" jobs. 295,000 (past decade average) to be exact. How will this impact the actual number? We will find out shortly. One thing to note: of the 100,000 consensus headline adjusted print, the seasonal adjustment factor itself will be roughly three times the actual print that will move the market. In a year of record temperature abnormalities and the "average seasonal adjustment" being anything but, we leave it up to readers to do with this data as they see fit.

While normally quite absurd, we do have to admit that last month, Deutsche Bank's Joe LaVorgna was among the analysts closest to the final actual number, which came in far below consensus. As such we give him the benefit of the first forecast: Joe LaVorgna is expecting a headline/private payroll increase of 75k/80k respectively. The market is looking for 100k/110k. Unemployment is expected to hold at 8.2%. The irony today is that max pain is a far stronger number, which in light of some very recent economic news, can not be ruled out (see Nick Colas' discussion below): if indeed NFP rises by well over 100,000 the market will have to push back its prayer that the NEW QE will come in September into 2013 as Bernanke will not do another easing round just as the presidential election approaches. What are some others thinking? Here is what Bank of America says.

Expectations were for an increase in non farm payrolls of 160,000, and a 8.2% unemployment rate. We got +115,000, and 130,000 privates. Unemployment rate at 8.1%, lowest since January 2009. Schrodinger is alive and well.

More shortly

But anyway, the big thing is liquidity right now, not whether or not you have a job. 

What's your wild guess? 

• BOJ Adds to Monetary Easing After Contraction (Bloomberg)
• EU to punish Spain for deficits, inaction (Reuters)
• Obama, China's Xi to tread cautiously in White House talks (Reuters)
• Global suicide 2020: We can’t feed 10 billion (MarketWatch)
• Greece rushes to meet lender demands (Reuters)
• Obama Budget Sets Up Election-Year Tax Fight (Reuters)
• Foreign Outcry Over ‘Volcker Rule’ Plans (FT)
• Moody’s Shifts Outlook for UK and France (FT)
• France to Push On With Trading Tax (FT)

Whopper of a NFP number, which prints at 243K, higher than the biggest forecast of 225K, on consensus expectations of 140K, the biggest jump since February 2009. The devil will certainly be in the revision details.

More shortly.

The past few weeks have been so heavy on horrendous newsflow out of Europe, that we've had virtually no chance to analyze the negative news in this country. And following an atrocious H1 GDP number, and just as ugly August Non Farm Payrolls number, many are betting the ranch that at this point the economy has no choice but to go up. As most know by now, the conventional wisdom wildcard that is supposed to take Q2 GDP from its stall speed level back to some modest hockeysticking, is autos, and more specifically car assemblies and production. Unfortunately, as often tends to happen, conventional wisdom is wrong and we are happy to demonstrate, using Stone McCarthy data, that not only will autos not push Q3 GDP higher as expected, but in fact the manufacturing production which is expected to benefit from a strong car market, as well as Industrial Production as a final metric, will disappointing substantially, leading to a major miss in Q3 GDP, which we have anticipated will be at best a zero, and realistically, a negative print, and carry over such manufacturing weakness into Q4 and 2012.

Everyone will focus on the Non Farm Payrolls report, which even Goldman expects will be just a shade higher than negative. We, for what it's worth, are confident that when all the revisions are said and done, and when removing the birth/death adjustment, both the headline, and the private jobs number will be negative.

All relevant news by www.thetrader.se

Gold and silver have given up a small bit of yesterday’s strong gains in all currencies (especially the euro – see chart below) but are up more than 1% and 3% respectively on the week. Asian equity indices were higher overnight and are higher for the week, except for India where there are growing concerns about surging inflation and interest rates. European indices are higher today and most are up by some 1.5% to 2% on the week – as are US indices...Gold’s price surge yesterday was likely a combination of short covering, the very bullish demand figures out of China, accommodative monetary policy sounds from Trichet and Bernanke. The geopolitical situation in Egypt and the Middle East likely also led to buying.

An 3rd grader can pick the [fr]odd one out. Yet Wall Street can't. Can you?