Andrew Wilkinson, Chief Economic Strategist at Miller Tabak
& Co. LLC, asks should we look to sell stocks and bonds on the
payroll reading? He answers his own question in saying he is not
sure about that.
Sure, he says, the reading is well above consensus at 204,000
and contains a net positive three-month revision of 60,000 AND at
the time when the government shutdown was supposed to hinder jobs
growth. But, he adds, the reality that has become plain in
subsequent reports is that the impact of the shutdown is much less
than people feared with businesses retaining great optimism about
the future. Looks to him like hiring did not freeze as feared. The
net impact is that the three month pace of hiring is now back to
202,000 or about 50,000 where it had recently fallen to. That, he
says, brings the taper discussion back full circle.
He notes the Fed has long argued that on a cumulative basis the
net improvement in the employment picture is significant enough to
think about reducing the flow of purchases. And now, he says, we
are back to the 200,000 marker once again and despite being fazed
by fiscal fogs, the discussion is likely to happen soon.
However, according to Wilkinson, this is not likely to be as bad
for bonds as the knee-jerk reaction suggests. Wilkinson has argued
that the forward-guidance measure is filtering through and is
replacing the onset of tapering as the preeminent market driver. We
have seen, he says, what the impact of a spike in yields is.
Meanwhile, he adds, we have learned that optimal control settings
will leave the fed fund rate lower than anyone had anticipated.
Yields need not take it in the neck today, while stocks will soon
start embracing the rosier outlook for consumption from better
payroll growth, he says.
Wilkinson notes the establishment survey showed the goods
producing sector added 35,000 jobs in October with around half
(19,000) coming from manufacturing. Does the ISM manufacturing
reading now make sense?, he asks. Wilkinson notes construction
added 11,000 positions in spite of the impact rising mortgage
yields had on home buying activity over the summer. Retailers added
444,000 positions, while professional and business services added
44,000. Only wholesalers and government shed 5,000 and 8,000
Wilkinson says the household survey continues to leave the Fed
with its employment quality conundrum. The unemployment rate rose
by one-tenth to 7.3% and the participation rate fell to 62.8% from
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