Reading economic data is much more difficult when you have to rely on media based market alerts instead of a simple ticker reporting the real numbers. When I worked on the floor the number would flash: non-farm payrolls were up/down X, the unemployment rate was Y, hourly earnings grew/fell by Z%. We knew what the expectations were and how the numbers fell in comparison to expectations.
Now we get unsolicited analysis in front of the actual numbers and often are left wondering, ‘but what were the actual numbers?’ When we scroll down the story deep enough we find them and think ‘why didn’t you say that in the first place’ and often are left wondering if what we are getting is analysis or spin.
Non-farm payrolls for September came out slightly lower than expected (a little bad news) but the August numbers, which were bad, were revised upward (good news). The unemployment rate moved from 4.6% to 4.7%.
Overall positive and equity indexes rallied. But they rallied the past week on increasing bad news on housing and consumer confidence. Why? Because that increases the likelihood of another Fed easing, good news for the market, right? Well good news if you look at the rate cut in a vacuum and not the underlying justification for it.
That brings us back to the analysis. The analyst quoted in the story I read said the positive numbers would be good for equities. Of course the same analyst in past stories saw negative economic news as encouraging for equities because it made another rate cut more likely. Of course it is good to remember that many of these analysts are brokers and make a living by purchasing equities for clients so it should not be a surprise when economic news: positive, negative or in between is used as a positive indicator for equities.
Given that the unexpected drop in payrolls in August was an important factor in the Fed cutting interest rates by 50 basis points, should they go ahead and reverse that decision now that we know that was a mistake?
Tags: Economic outlook
