The white collar world will begrudgingly start pretending to work again this week after taking pretty much the whole of December off to revel in undeserved privilege and creature comforts obtained on leverage.
For market participants, there’s plenty to digest once the New Year’s Veuve is vomited and Perrier purged.
The headliner is obviously the US jobs report, which people whose job it is to make guesses about jobs reckon will print 170,000.
If that seems like a generic number to you — i.e., a simple exercise in applying a qualitative “slowing” factor to the three-month moving average of the NFP headline — you’re not wrong.
Big bank economists pulling in six, seven and eight times the median national income will tell you a lot of work goes into their NFP forecasts, and all their other forecasts besides. And that such things can’t possibly be trusted to lesser castes where RNs (who stick needles into people’s veins, sometimes as part of life or death emergencies), teachers (whose job it is to insure against a future state where a majority of adults are morons) and engineers (who build bridges and spaceships before Wall Street lures them away with promises of strippers, coke, Hermès and strippers in Hermès doing coke), toil away for what, by comparison, are subsistence wages.
It’s a noble profession. Inputting numbers into a model someone else created, demanding someone junior to you write an editorial around the model output and then putting your name on the forecast. It’s good work if you can get it, surpassed only by the “God’s work” your colleagues in Markets and IB are doing for twice or thrice your pay.
I digress. There’s some concern that recent US job gains were overly concentrated, where that means just two sectors accounted for a majority of hiring. Outside of government and healthcare, job growth has been “flat to negative,” Bloomberg Economics remarked. “As a result, wage growth will moderate in December.”
Of course, cooler wage growth is precisely what the Fed and Wall Street are hoping for. If regular people make too much money, they might try to buy a lot of stuff. In addition to being inflationary, that kind of thing has the potential to upend the Belle Époque order we’ve worked so hard to establish and maintain. Ideally (and I shouldn’t have to say this) only the wealthy are able to buy things. As anyone older than 125 well knows, a well-functioning, healthy economy is one in which 1% of the populace wanders around boutiques and fashion districts with turtles on Gabbana leashes.
In addition to NFP, investors, traders, macro observers, economists, financial journalists and all sorts of other people united in the fantasy that says waking up every day to participate in the meaningless tragicomedy of human existence is worth the trouble, will be treated to a two-month-old guesstimate of US job vacancies.
You might recall that job openings plunged in the last update, another boon to a soft landing narrative that even the Street’s more pessimistic economics teams now concede is plausible.
Consensus is looking for an uptick in openings to 8.85 million from 8.733 million. That latter figure will be revised. And the headline print won’t be 8.85 million. And the response rate for JOLTS post-pandemic is around 30%. In other words, the only thing more useless than these figures are Wall Street’s guesses as to what they’ll show.
You know the narrative: Job openings need to fall further so that wage growth can normalize without the traditional increase in unemployment that historically was necessary to put downward pressure on inflation.
Traders will also get the December FOMC minutes this week. Those’ll be parsed for any evidence to suggest the Committee wasn’t as dovishly inclined as the market traded in and around 2023’s final policy gathering. “Dovish pivot” is the narrative. The market sees ~150bps of rate cuts in 2024. That’s the context for the meeting minutes, and traders will also look for any “new” information on the Fed’s thinking around QT in light of falling RRP balances and the potential for reserve drain to commence from mid-2024.
Also on deck: ISM manufacturing and services, ADP, inflation data out of Europe and lots of senseless death, in Eastern Europe and the Mideast, yes, but in a lot of other locales too.
What’s the over-under on combined civilian casualties in Gaza and Ukraine this week? I grew up around a mob book. It’s not an especially complicated endeavor. Maybe I should start taking weekly death toll bets and donate the profits to Ukraine and humanitarian relief for besieged Gazans. Actually, no. That won’t work. It’ll all be embezzled, misappropriated and otherwise stolen by Hamas and Ukraine’s highly “efficient” military procurement department.
You really make a guy wanna quit his pointless office job and do something useful for a living.
Thanks for another year of great information and musings. And for wrapping it up on a high note. You have the very rare gift of being able to inform, educate and entertain all at the same time. Although I doubt you’re the type that resolves anything simply because of a date change, if you were inclined, I would hope you’d resolve to stay just the way you are.
That’s a very kind comment. I appreciate it.
Wow, liking this spicy tone to end the year, may 2024 be more of the same =)
It’s a US presidential election year, we are going to need as much spice as possible to get through it.
Signature stuff. Grateful for the incomparable flourish to cap this year. From all of us around the edges we applaud your efforts, skills, and humanity.
Keep on Trucking, Comrade H!
Putting the game in proper repose a much appreciated necessity.
I think, based on anecdotals, that small businesses and lower income households are having a substantially harder time, economically speaking, than large corporations and higher income households.
Large + higher are cruising in smoothing air at Angels 30 with champagne flutes, while small + lower are lurching through stormbursts and dodging hilltops.
I also think, based on nothing, that the fortunes of large + higher manifest in headline economic data more, and more quickly, than the struggles of small + lower which tend to show up in the secondary instruments.
If the pilot adjusts the glide path and flare to give small + lower a soft landing, large + higher may see the far end of the runway disappear below as they overshoot into a no landing. If the pilot comes down faster to grease the landing for large + higher, small + lower may get a gear-collapsing, belly-crunching hard-ish or at least not-very-soft landing.
Is the pilot watching the instruments of headline economic data, or the secondary dials?
FWIW, income inequality dropped in the last few years
Yeah, buddy. I can feel the egalitarian utopia in the air everywhere I go in America these days. Just yesterday I caught a whiff of Chanel 5 on a homeless lady. “Miss, is that the legendary ‘extravagant floral richness’ of 5 I smell?” I wondered. She didn’t answer, though. “What a bitch,” I thought to myself. “Give ’em some perfume and watch ’em get arrogant.” Later, when I passed her again sitting in the exact same spot, I realized she was actually dead, frozen solid!
We can regret a situation like the high inequality in the US while noting the trend has stopped getting worse… at least for a couple of years.
Also – homelessness, for the part that is not mental health related/drug abuse related is fundamentally about housing supply. I am not a US citizen so my ‘support’ means zilch but I support higher density and reforming zoning rules to allow for more housing in parts of the country people seem to want to live in (California, NYC etc).
From what I’ve read, income inequality declined on some measures during the pandemic (stimulus etc) and has resumed increasing so far in the post-pandemic. See e.g. Fed survey October 2023.
I am hopeful that labor supply trends will increase labor share and wages trendwise, although the capitaltechbros are all in on AI to nip that in the bud and more besides.
Extent of income inequality is also different from divergence in how higher / lower income are doing in the current economy.
H- thanks for another year of great digital ink. The best $7 I sped every month. Happy New Year !
“Spend”
Entertaining and informative. This is why I keep paying my $7/month.
As for 2024, I’m just hoping for a net positive in several aspects of life.
“…turtles on Gabbana leashes.” Oh my lord, this was a gem of an article, thank you, H.