Here’s what I wrote Saturday in the Professional Edition Treasury update about what the real time withholding tax data told us about the likely non-farm payrolls report.
Because of the radical slowing in withholding taxes in September, I would expect a decline in the growth rate of non farm payrolls. The currently reported consensus estimate of a gain of 183,000 is in line with the recent rate of increase, and is therefore probably much too high. On that basis I’d expect a “miss” when this number is reported on Tuesday. Treasury bond traders would likely view that as bullish for Treasuries. But what about stock traders? Chances are that they’ll see it as a reason for the Fed to at least continue or even increase QE, so they may buy the news as well. This is speculation on my part, but that’s my guess for what it’s worth.
The headline seasonally adjusted nonfarm payrolls number came in at 148,000 in the BLS release this morning.
The withholding tax data for August also accurately foretold that the August number would be revised up in the September release. Earlier it told us that the July payrolls release was too high. Here’s a snip from the Treasury market update a few weeks ago.
The jobs figures released for August are far weaker than the withholding tax collections indicated. The BLS
data is therefore likely to prove misleading once again. The August number should be revised up sharply in
the September release. The fact that the market trades based on the initial release, and the Fed makes
decisions based in part upon it, is completely insane. If the Fed does not taper QE because of the slightly
weaker than expected jobs number, which is almost certainly too low, then it will continue to fuel the raging
asset bubbles in stocks and housing, creating an even more dangerous situation as time goes on.
This morning, the BLS revised the August headline number from 169,000 to 193,000. If that more accurate figure had been available last month, would the Fed have elected to taper QE? This illustrates once again the absurdity not only of the market’s kneejerk reactions to initial data releases, but of the Fed basing its policy decisions on those data releases.
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