Citi has some “things” they want you to take note of headed into the Friday jobs number that could ultimately determine “to hike or not to hike” next month. Here are the bullets (these are based on the initial print, i.e. not the revision):
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In these 19 years the August initial print has been above 200k only once (That was 1998 when we saw a +365k number. However that was obviously an aberration as it was preceded by a +66k number and followed by a +69k number)
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In the past 19 years the August number has “printed” below zero 7 times (2000-2001 and 2003 during the bursting of the NASDAQ bubble and 2007-2010 during the “Great recession”)
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It has printed between zero and +100k four times in 19 years (1997,2002,2012)
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It has printed +100k to +200k 7 times
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The average print over this 19 year period is +48k (that includes 7 negative years)
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The average print of the 12 years that have not been negative is 125k
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The last 5 years have averaged 116k for August with none of those above 200k. In 1999 (a year we are still very focused on) we saw initial prints of 268k and 310k in June,July respectively followed by an August print of 124k. What is also interesting is the path we have seen this year on releases and that seen in 1999
Consensus is 180K. Which means, as Citi goes on to suggest, that it’s entirely possible we get a disappointing number. Which, incidentally, would probably be just fine for the FOMC as we’d get what would amount to a replay of June when the abysmal May print spoiled weeks of hawkish Fedspeak, triggering a quick about-face ahead of the Brexit vote. Here’s a bit of commentary from Barlcays along with the visuals:
“In June, the median member of the FOMC expected two rate hikes this year and every member expect at least one (Figure 1). Committee members held this view in light of a drop in inflation expectations and considerable uncertainty over the near-term path of activity. The FOMC, like us, takes its primary signal on economic activity from the labor market. In June, the 3mma of employment growth fell to 116k (Figure 2), following a very weak May jobs number. That average has since improved to 190k and is likely to move higher following the August jobs report. So long as August employment data is solid, committee members will likely maintain their faith in the strength of the economy.”
(Charts: Barclays)
We also saw some interesting backup in Fed Fund Futs on Monday reversing some of the post-Yellen move:
In any event, stocks closed green as usual and CNBC at one point ran an amusing segment that asked whether the Dow would hit “38,000 by 2025”. As far as “fear” goes, well, it’s still awfully quiet out there:
As Goldman wrote late last week:
“The current streak of market stability represents the longest period without a 1%+/- daily move since the summer of 2014. Volatility has been similarly subdued with the VIX at 14. Stock picking has been challenging with three-month S&P 500 return dispersion ranking in the 4th percentile in 30 years indicating a tight distribution of company returns.”
And why shouldn’t everything be quiet? We’re just sitting at all-time highs going into the most uncertain election in US history with global rates sitting at or below zero and asset bubbles as far the eye can see.
It should be fine.
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