With the government shutdown stretching into an improbable 4th day (and with every additional day added on, the likelihood that the impasse continues even longer and hit the debt ceiling X-Date of October 17 becomes greater), today's monthly Non-Farm Payroll data has quickly become No-Farm Payroll. However, just like on day when Europe is closed we still get a ramp into the European close, expect at least several vacuum tube algos to jump the gun at 8:29:59:999 and try to generate some upward momentum ignition in stocks and downward momentum in gold. In addition to no economic data released in the US, President Obama announced last night he has cancelled his trip to Bali, Indonesia, to attend the APEC conference and instead to focus on budget negotiations back at home - which is ironic because his latest story is that he will not negotiate, so why not just not negotiate from Asia? Ah, the optics of shutdown.
With the BLS shutdown, and this Friday's NFP report indefinitely delayed, the only labor report this week would be the (highly inaccurate) anticipated ADP Private Payrolls data. Moments ago it came, and disappointed all those hoping that finally, after five years, the Fed's shotgun wealth creation strategy may be working when it not only missed expectations of 180K, instead printing at 166K with the bulk of jobs created in the service-providing sector, but excluding massive downard revisions (July from 198K to 161K, August from 176K to 159K), would have been the lowest print of the past 4 months. And while, finally, some 1000 manufacturing jobs were created in September, for the first time in over a year the high-paying financial sector saw an exodus of 4000 jobs. Wave goodbye to the "third half" 2013 recovery.
While some have argued that the Fed is flying blind, given their endless efforts to convince the market that their actions (or inactions) are now all data-dependent - what happens when that data simply does not exist? As SMRA notes, the official word from the BLS is that they are working under the assumption that there will not be a government shutdown and the employment data will be released as scheduled; but what happens if the un-negotiation reaches beyond October 1st? How will our central-planners know what to do?
The highlight of today's economic releases will be the 8:30 am non-farm payroll data, expected to print at 180K jobs, up from July's 162K, and result in an unchanged 7.4% unemployment rate. The "most important jobs number ever " is neither, because even if it comes as a wild outlier to the good or bad side, the Fed is unlikely to change its tapering intentions this late in the game. Still, it will provide fireworks in a very jittery market and if the number is far stronger than expected, expect the 10 Year to finally blow out from below the 3% range which it breached briefly overnight, and never look back, at least not until there is an August 2011 wholesale risk revulsion episode and stocks tumble. Speaking of jittery, overnight the WSJ reports that if picked as Bernanke's replscament, Larry Summers' faces an uphill battle to get the votes of three key democrats on the Senate Banking Committee (Jeff Merkley, Sherrod Brown and Elizabeth Warren). It would be only fitting that the dysfunctional Democratic dominated senate now lashes out against the president, and in the process scuttles the market's only hope of maintaining its Fed-derived gains over the past five years... And there is, of course, Syria which is becoming increasingly problematic for Obama whose support in Congress is looking ever shakier. Will he go it alone in the case of a no vote?
It is likely that he does, as he is Chinese and was a Chinese refugee who fled to Hong Kong with his family to avoid the perils of war. Refugees who flee from their homeland to start new lives in other countries tend to have a deeper appreciation of and understand the importance of owning physical gold.
Do those collecting three times the median wage really need the same SSA benefits as those with no other retirement income? The conventional answer is that any means testing of Social Security would destroy its political popularity, but in reality such means-testing would likely affect only the top (higher-income) 10% of the populace. "We wuz promised" does not apply to "pay as you go" systems, which are extraordinarily exposed to current trends and realities. It's time for America to examine the social contract/Social Security in an era of declining full-time employment and widening income inequality. We as a nation need to prioritize the Social Security retirement income of those with no other pension incomes.
As the disconnect between payroll data and GDP grows, and the schrodinger reality of a non-farm-payroll print and JOLTs data increases; it will not come as a total surprise to Zero Hedge readers that Goldman Sachs has finally been forced to admit that investors have been fooled by the relative importance of jobs data. While the payrolls data has the largest financial market effect of all economic indicators (by a large margin), Jan Hatzius finds that neither payrolls (or Advance GDP) provide any incremental information about the broad strength of the economy.
In April, according to JOLTS, there were 108K job additions. According to the NFP data, the job gain was 199K or 84% more than per JOLTS
In May, according to JOLTS, there were 109K jobs additions. According to the NFP data, the job gain was 176K or 62% more than per JOLTS
In June, according to JOLTS, there were 120K jobs additions. According to the NFP data, the job gain was 188K or 57% more than per JOLTS
Adding across for all of 2013, JOLTS would have us know that only 837K jobs were added (or 140K per month average). Compare this to the 1,185K new jobs according to the Establishment Survey (198K per month average).
-> A 42% difference!
Frequent readers are aware that one of our favorite topics is forensic market evidence confirming early release of market moving data to select "buyers" of said data, who then can trade ahead of the crowd and make illegal profits. The most recent example of just this took place last Friday when someone or something was leaked the non-farm payroll data as much as three second early. But while various third party profit-seeking intermediaries such as Deutsche Boerse's MNI, UMichigan consumer confidence and others have acknowledged to presell early dissemination of specialized data to subscribers such as well-paying high frequency traders, at least government data was said to be exempt from such a profit motive. At least until now: the WSJ reports that the FBI "has discovered vulnerabilities in the government's system for preventing market-moving economic reports from leaking to traders before public release. Law-enforcement officials found "a number of operational vulnerabilities" involving "black boxes" used by several departments to control the release of sensitive economic data such as the monthly unemployment rate, according to a report by the inspector general at the Commerce Department."
Compared to last week's macro-event juggernaut, this week will be an absolute bore, although with a bevy of Fed speakers on deck - both good and bad cops - there will be more than enough catalysts to preserve the "upward channel" scramble in the S&P and the zero volume levitation to new all time daily highs despite the lack of daily bad news. Speaking of Fed speakers, we have Fisher today, Evans’ tomorrow followed by both Plosser and Pianalto on Wednesday. The key overnight data point was the continuation of July PMIs out of Europe, this time focusing on the service industry. As Goldman summarizes, the Final Euro area Composite PMI for July came in at 50.5, marginally above the Flash reading and consensus expectations (50.4). Relative to the June final reading, this was a sold 1.8pt increase, and building on consecutive increases in the past three months, the July Euro area PMI stands 4.0pts above the March print. Solid increases were observed across all of the EMU4 in July, most notably Italy. The July reading is the highest Euro area PMI level observed since July 2011.
Today is the second time in three months that someone, or something, either leaked the Non-farm payroll data just ahead of its official release, or if not leaked then a trading algorithm manipulated the bond market ahead of the official data release by launching a "momentum ignition" (see here, here and here for much more on how HFT uses this strategy over and over to set trading bands) launch higher just ahead of the official data release at 8:30:00:0000 am that desperately needed to push 10 Year yields, already on the verge of a 2 year breakout, lower.
The central bank "reason" goal-seeked for today's US overnight ramp - because it sure wasn't fundamentals with both German exports (-2.4%, Exp. +0.1%) and Industrial Production (-1.0%, Exp. -0.5%) missing - was the weekend Spiegel story that despite the unanimous decision by the ECB last week to keep rates unchanged, ECB chief economist Peter Praet and Mario Draghi himself had insisted on a 25 bps rate cut. They were, however, stopped by seven council members from the northern euro states, including Weidmann, Knot and Asmussen. As a result, Draghi was steamrolled in the final vote. Yet somehow this is bullish for risk, pushing equity futures higher and peripheral debt spreads lower, even as the EURUSD has drifted higher. Of course, one can't have an even more dovish ECB as a risk on catalyst alongside a rising Euro, but who cares about news, fundamentals, or logic at this point. All that matters is that US futures are higher, which was especially needed following yet another rout in the Shanghai Composite which dropped 2.44% back under 2,000 following news that China's Finance Ministry has told central government agencies to cut expenditures by 5% this year, and a 1.4% drop in the PenNikkeiStock225 on a weaker USDJPY. Remember: all is well in the global economy (whose forecast is about to be cut by the IMF) if the US is generating a record number of part-time jobs.
Presented with little comment aside to note that with all eyes squarely focused on this Friday's payroll data (and today's ADP and claims), it is worth reminiscing of the hope that we felt in 2006 and 2007 when it was "different this time" and the divergence between a plummeting ISM employment index and non-farm-payrolls meant nothing...
France Prohibits Sending Currency, “Coins And Precious Metals” By Mail
France has prohibited the sending of currency, “coins and precious metals” by mail.
In new legislation which was enacted May 23rd, the French government decreed that it is forbidden to send all forms of currency - coins and cash and all forms of precious metals – coins, bars and jewellery by mail.
As the world waits breathless for some Goldilocks print in tomorrow's non-farm payroll data, Gallup's most recent survey of employment trends does not paint a pretty picture for the real economy. Though, by the 'adjustment bureau' and their Arima-X goal-seeking, nothing is ever clear, not only is the payroll-to-population (the number of people working) worse than a year ago but the unemployment rate is also rising with under-employment - at 18.0% - near 15 month highs. If the NFP print plays out in line with this, the estimate of 165k will be woefully over-optimistic, leaving the question of whether bad-is-good, or have we crossed the Rubicon of belief in moar is better.