Markets were relatively subdued on the day following the frenetic activity of the past couple of weeks.
The whole world, it would seem, is awaiting the US Jobs Data to be released later today.
Which is interesting. As it is the most lagging indicator of economic activity that exists across the whole range of economic data. In the current post-Covid environment it is undoubtedly the least relevant of all the series.
The great resignation, the pursuit of entrepreneurial endeavours or just plain don’t need to keep working sentiment, have all played a role in driving unemployment to what must be said as near as you can get to full employment.
This is something we usually associate with booming economies. As elsewhere in the west, this is not the case just now.
The employment data has never been less relevant to forecasting economic activity going forward than it is now.
Yet here we are. All eyes are already glued to screens around the world many hours in advance. Ready to react in profound trading the moment the data is released.
Why? Because this is a festival. A festival of excitement and blind hope that just maybe there is something in this world that distils all its complexities into just one simple data point and notion. That this number is the US economy
In today’s world, nothing could be further from the truth, but many recession deniers cling to this as one would a life jacket in an ocean storm. The release can therefore trigger significant volatility, and one should approach the event appropriately. Even, if all the fuss and reaction are misguided.
The really interesting thing about all of this is that there is the chance that unemployment can now begin to edge upwards. I mean, how low can it go? Furthermore, job vacancies have begun falling while new jobless claims have been rising.
A Jobs number that disappoints, is probably the more likely outcome. If there is any change at all.
Even so, many day traders and fund managers will be keen to turn even this reversal into a bullish outcome by suggesting the Fed will have to pause. The whole idea that the Federal Reserve will pause its rate hikes or be cutting rates next year is just one big absurdity, I have to say. Despite its cult-like popularity.
Expect volatility, but my view on this whole process remains that it is simply a major corrective rally in a to be continued bear trend over coming months.
The risk that we are in a 3-6 year bear market phase remains rather high.
Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities
