Discover more from The Credit Writedowns Newsletter
Yesterday on the Real Vision Daily Briefing, my colleague Jack and I answered a question by viewer Dianna, "are there metrics you are watching closely now as compared to, say, a month ago?" My answer was US jobs numbers and initial unemployment claims.
Why? Because I believe the Fed is the most important central bank in the world. And they are now emphasizing the employment side of their dual mandate more than inflation. If the jobs picture comes in hot and heavy, the Fed will move to tighten policy more quickly. But, on the other hand, if we see ugly numbers, that means the Fed will be looser. And continued fiscal policy stimulus in the US will be more likely. Until today, nothing recently was, as I put it yesterday, shockingly bad or shockingly good in developed market economic data.
But today's US jobs number was ugly -- really ugly. Expected were 978,000 jobs for April after a 916,000 job print for March. Instead we got 266,000 jobs added and a massive downward revision to the prior month's data to 770,000. If you take revisions into account, the net was only 78,000. That's absolutely horrible. The unemployment rate actually rose to 6.1%, instead of declining to 5.8% as expected.
The bond market is rallying big time as a result. The net short position is forcing major short-covering, which initially pulled 10-year Treasury yields down as low as 1.469%. We're currently at 1.521.
I'll have more as I digest the numbers. But I wanted to get something out straight away. The long and short here is that the US economy is being propped up by fiscal transfers. There is still weakness beneath that. And these jobs numbers prove this. If you want more on what I'm thinking about the economy and markets now, click here to see the Real Vision Daily Briefing from last night.