Goldman: "Weaker Than Expected" Jobs Report Means No Taper Before March

Tyler Durden's picture


Yesterday Goldman explained why glorious and abysmal job numbers would both be sufficient to propel the Stalingrad and Poor to new ATH. So far, they were right. And while the number was not exactly abysmal (ironically, the market is now hung up on weaker than expected data just to make sure Uncle Ben and Uncle Janet stay around as long as possible), it was, as Goldman's Jan Hatzius just announced, "somewhat weaker than expected, as the disappointment on September payroll growth was only partly offset by back-month revisions, while average hourly earnings grew more slowly than expected." He said a bunch of other things too, but the most notable was that "this report makes it more likely that the Fed pushes the first reduction in the pace of its asset purchases into 2014... we think that March is the most likely date under our economic forecast." And since it is now obvious that the Fed is completely oblivious to what ongoing QE does to high quality collateral (which it is now soaking up at a pace of 0.4% in 10Yr equivs per week), full steam ahead it is. We expect Dudley to get his Hatzius marching orders shortly.

From Goldman:

The unemployment rate ticked down, but benefitted from favorable rounding and a small decline in the participation rate on an unrounded basis. Although December remains a possibility, this report makes it more likely that the Fed pushes the first reduction in the pace of its asset purchases into 2014. While the uncertainty is considerable, we think that March is the most likely date under our economic forecast, and the assumption that the next set of fiscal deadlines proves less disruptive than the most recent set.


1. Payroll employment rose 148k in September (vs consensus 180k). While August employment growth was revised up?as has been the typical pattern in recent years?July employment growth was revised down, leaving the net revision to the prior two months only +9k. By industry, all of the slowdown in job growth relative to August was found in private service-providing industries, as employment in leisure and hospitality fell 13k (vs. +21k in August) and employment in health and education services rose only 14k (vs +61k in August). In contrast, construction employment rebounded (+20k), potentially due in part to more favorable weather in September, while government added 22k jobs, entirely due to the state and local sector. This morning's report leaves the 3-month trend in payroll job growth at +143k and the 12-month trend at +185k.

2. The unemployment rate declined by one-tenth to 7.2% to one decimal place (vs consensus 7.3%). On an unrounded basis, the decline was a smaller four basis points to 7.235%. Although employment grew by 133k according to the household survey, on a payroll-consistent basis?adjusting for definitional differences between the two surveys?employment declined 195k. While the labor force participation rate held constant to one decimal place at 63.2%, on an unrounded basis the rate continued to edge down slightly.

3. Average hourly earnings grew only 0.1% in September (vs consensus +0.2%), leaving the 12-month rate of increase at 2.1%. The average hourly workweek was unchanged at 34.5. The index of aggregate weekly hours?the product of workers and hours per worker?grew at an only-modest 1.1% annual rate during Q3.

4. Although December remains a possibility, this report makes it more likely that the Fed pushes the first reduction in the pace of its asset purchases into 2014. While the uncertainty is considerable, we think that March is the most likely date under our economic forecast, and the assumption that the next set of fiscal deadlines proves less disruptive than the most recent set. We continue to expect the first increase in the fed funds target rate in 2016 Q1.

5. With the employment report, manufacturing data, and sentiment surveys in hand, we start our September CAI at 2.6%, down from 3.1% in August.

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Tue, 10/22/2013 - 10:03 | 4079238 Headbanger
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All it does is show the sheer ineptitude of our government to do anything constructive what so ever.


Tue, 10/22/2013 - 10:05 | 4079259 booboo
booboo's picture

Insanity is baked in. There is no checking out of the Crazy Acres Rest Home.

Tue, 10/22/2013 - 10:09 | 4079264 flacon
flacon's picture

I bought spy puts. Maybe my sanity is insanity.... but there it is. Nothing goes up straight for ever, ever.  It's going to be sell the news for the next week or three.

Tue, 10/22/2013 - 10:11 | 4079276 Beam Me Up Scotty
Beam Me Up Scotty's picture

How much sell will there be?  100 points on the DOW?  Christmas is right around the corner, the stores have the trees up.  Santa rally in 3...2....1

Tue, 10/22/2013 - 10:12 | 4079282 flacon
flacon's picture

Huge divergence between SPX and VIX at the moment. Something is going to snap soon. 

Tue, 10/22/2013 - 10:14 | 4079292 Beam Me Up Scotty
Beam Me Up Scotty's picture

The VIX probably.

Tue, 10/22/2013 - 10:28 | 4079332 spastic_colon
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wishful thinking.......not until twatter gets IPO'd and everyone racks up black friday credit with money they cant pay back

Tue, 10/22/2013 - 10:39 | 4079375 FL_Conservative
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And the REO-to-Rental deal securitizes.  I just saw that Morningstar, Kroll and Moody's are rating the deal which is to close by the end of the year.  Then the cover can come off of the roach-coach motel.

Thu, 10/24/2013 - 19:49 | 4088489 Tegrat
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Uh the SPX and VIX are BY DEFINITION divergent. What's unsual is if they move in the same direction...


Tue, 10/22/2013 - 10:17 | 4079299 Headbanger
Headbanger's picture

Grinch implosion in 3.... 2....   1....  as it becomes more clear the consumer is not only tapped out but feeling hopeless and desperate.

Oh yeah.. Don't forget the Obama Borg dictum that we will all be assimilated into Obamacare... resistance is futile. 

Watch what that shit does to Holiday spending !  Ha!

Tue, 10/22/2013 - 10:50 | 4079413 Beam Me Up Scotty
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The worse the news, the better the Stawk Market will do, because QE will be increased.

Tue, 10/22/2013 - 11:22 | 4079537 MissCellany
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Well, Goldman also called gold a "slam-dunk sell" through next year, I think...

Tue, 10/22/2013 - 10:21 | 4079273 Headbanger
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And we say Hitler was insane!  The ass clowns we have in DC are worse than insane... they're complete idiots who wouldn't even know what it is to be rational in the first place.

It's looking more and more like the movie 'Idiocracy" is becoming reality.

But it's very obvious now just how terrified Wall Street abd DC are now to even taper a little bit.

So just imagine the sheer terror they have when they see their insane manipulations no longer work!

The bigger they are.. The harder they fall

Tue, 10/22/2013 - 10:01 | 4079242 spastic_colon
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the fed does not think there is an equity bubble, they say fair value is 1725-1800 so using their logic no bubble until 2000+.....and quit bringing up "taper"....there never will be any....GS just using this to "tickle" the algos.

Tue, 10/22/2013 - 12:56 | 4079839 bh2
bh2's picture

The FED will likely taper when pigs can fly.

Tue, 10/22/2013 - 10:01 | 4079244 Xibalba
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REDUCTION?  There won't be no reduction...evar

Tue, 10/22/2013 - 10:07 | 4079265 DeadFred
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LOL Friday humor on a Tuesday. They say Janat's might taper, never

Tue, 10/22/2013 - 10:19 | 4079311 Mad Mohel
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Seriously, those motherfuckers get paid to put out gems like this? Where are the pitchforks and firing squads?

Tue, 10/22/2013 - 10:03 | 4079245 Dr. Engali
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Let me save you a lot of wasted time and digital ink squiddy, hopefully a few muppets too. The fed will never taper. They will only end up buying moar.


That is all.

Tue, 10/22/2013 - 10:13 | 4079286 Beam Me Up Scotty
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The only "taper" that will happen now will be a possible decrease in the amount of increase.  So the Fed will say we are just going to increase the amount of QE to 150 billion a month instead of 200 billion a month.  They will call that a decrease.

Tue, 10/22/2013 - 10:01 | 4079246 Jumbotron
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Fuck me silly.............THERE WILL BE NO TAPER UNTIL THE COLLAPSE !!!!

Tue, 10/22/2013 - 10:02 | 4079249 Jumbotron
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.................and then there will be MOOOOOOOOOORRRRRRRREEEEEEEEE  !!!!!!!!!!!!!!!!!!!!!

Tue, 10/22/2013 - 10:02 | 4079248 Everybodys All ...
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A taper is never going to happen and only the clueless haven't fugured that out yet.

Tue, 10/22/2013 - 10:10 | 4079272 Dr. Engali
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Whenever the squid puts a piece out always assume the opposite. They are written for the muppets after all.

Tue, 10/22/2013 - 10:03 | 4079250 q99x2
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Shut down Goldman Sachs and lets get this economy on the road again.

Tue, 10/22/2013 - 10:05 | 4079258 JustObserving
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If you shut down Goldman, who will make policy for the Fed?

Tue, 10/22/2013 - 10:41 | 4079382 maneco
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....and JPM, Barclays and the rest!

Tue, 10/22/2013 - 10:05 | 4079255 oddjob
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Where's ekm?, according to him tapering had already begun last march. He's gone, but are the 20+ readers that constantly upvoted him still here too?

Tue, 10/22/2013 - 10:08 | 4079270 Seasmoke
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Where is Francis Sawyer ?

Tue, 10/22/2013 - 10:14 | 4079289 oddjob
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Francis was a case of shoot the messenger.

Tue, 10/22/2013 - 10:15 | 4079294 fonzannoon
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ekm was 1/3 right. He got the taper wrong. He said the dow could go to 30k. He got that right. He said "it would not matter". He got that wrong. That is why it is always important to have at least 3 predictions running at all times.

Tue, 10/22/2013 - 10:24 | 4079318 Dr. Engali
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I predict that we will be here this time next year talking about the same shit. Gold will be beaten down a couple hundred moar dollars and we will be screaming "gold bitchez" while the Dow is at eleventy cajillion. That is unless we are shown the front door like Francis.

Tue, 10/22/2013 - 10:06 | 4079263 youngman
youngman's picture

The talk of taper is so old school..that was last years Algo word of the day....they need a new word to move on...I think its Obamacare..that will be the headline for the next few months as the deadline gets nearer...when penalities come on line....or not..

Tue, 10/22/2013 - 10:07 | 4079266 Seasmoke
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Tue, 10/22/2013 - 10:12 | 4079279 Dr. Engali
Dr. Engali's picture

I hate the word Halfbreed:

Tue, 10/22/2013 - 10:17 | 4079302 fonzannoon
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I hate "foliage". Just look at that word. It looks stupid.

Tue, 10/22/2013 - 10:44 | 4079396 merizobeach
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"Vegetables are a garnish!" --my big fat executive chef friend

Tue, 10/22/2013 - 12:17 | 4079728 whirling tword ...
whirling tword freedom's picture

I hate "easing"...  it's so 2012... and it never seems to ease anything for me anyway.

Tue, 10/22/2013 - 10:30 | 4079336 BadDog
BadDog's picture

Me too. Everytime I hear that word, an image of Vlad the Impaler running a  sharpened wooden spike up some poor bastards rectum and hoisting him high in the air comes to mind.  Maybe it IS appropriate.

Tue, 10/22/2013 - 10:14 | 4079283 Chief Falling Knife
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I'm lookin at some earnings announcements.  Lexmark announced a 1% yoy increase in EPS, and a decline of over 3% yoy in revenue.....  and the stock is up over 9% this morning.


Tue, 10/22/2013 - 10:13 | 4079285 earnyermoney
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Only one point, really. PRINT MOAR.

Tue, 10/22/2013 - 10:13 | 4079288 TheLuckyGeneral
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The Stalinisation is almost complete comrades........

Tue, 10/22/2013 - 10:14 | 4079290 orangegeek
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MOAR TAPER - that's a pretty bold statement.


here's the implication - Fed has gone from 20% to 33% purchaser of all bonds issued.


by next March - that may get close to 40%.


should be fun to watch.  we're fucked.  it's just a matter of time.

Tue, 10/22/2013 - 10:15 | 4079293 edifice
edifice's picture

Weak jobs report = Good.  Good enough for a 100 pt. rally on the DOW.

Tue, 10/22/2013 - 10:17 | 4079303 ChaosEquilibrium
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The Dollar Index will be at ZERO at this rate....taper will be moot!


Equities are NOT going up today....The Dollar is falling!

Tue, 10/22/2013 - 10:23 | 4079324 Everybodys All ...
Everybodys All American's picture

Just to give you an idea of how f'd up this stuff is the Euro looks like the stronger currency. The nooses are going to be many in DC before this is all said and done.

Tue, 10/22/2013 - 10:31 | 4079344 Chief Falling Knife
Chief Falling Knife's picture

The Yen is still competing for who's shittier, already retraced all gains from the jobs(less) announcement.

I suppose I have to step back and entertain the idea that the US markets are only a quarter or a third of the way up their 75+% Nikkei-like advance.

S&P 2400 by spring anyone?

Tue, 10/22/2013 - 10:31 | 4079337 JPMorgan
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Taper is a no go, so QE to infinity it is.

Tue, 10/22/2013 - 10:37 | 4079339 maneco
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The next move by the Fed will be an ADDITION you EFFING VAMPIRE SQUID!!!!


Tue, 10/22/2013 - 10:39 | 4079370 ptoemmes
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Uncle Janet...don't you mean Aunt....wait a minute - you must have peeked.

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