OCTOBER’S JOBS REPORT AT 8:30

The October Employment report is released at 8:30.  Analysts are expecting a 450,000 and 420,000 increase in non-farm and private sector payrolls, respectively, a 4.7% unemployment rate, a 04% increase in average hourly earnings, a 34.8 hour work week and a 61.8% labor participation rate (LPR).

As with past reports, considerable attention will be focused on the LPR and wages. The LPR is declining rather than increasing as expected by the Federal Reserve, a forecasted increase the result of the early September expiry of enhanced unemployment benefits that paid approximately 52% of recipients more money not to work rather than to work.

As noted many times there are approximately 1.25 jobs available for every unemployed person. The workforce is about 5 million people smaller today than February 2020.

Wages are rising, an increase that has crushed productivity. Data released yesterday indicated that productivity feel the most since 1981 in third quarter, reflecting a sharp pullback in economic growth, an increase in hours worked and higher wages. It is the inverse of the Milwaukee’s Best tag line…It does not get any worse than this.

How will the data be interpreted? Will it continue with this week’s trend of What a Week?

Several times I commented about Thursday’s OPEC+ meeting. According to Bloomberg it lasted about 42 minutes. The Cartel stated it will stick to their slow pace of oil production increases disregarding President Biden’s demand to rapidly increase its production to slow the rate of inflation.

Bloomberg writes “The Cartel could now face a bare-knuckle with the White House.” OPEC + tells the world “Your Energy Crisis is not our problem.” The Saudi Arabian Energy Minister stated “if people are serious about attending to the real cause of the energy crisis they should focus on supplies of natural gas to Europe and Asia, and the related infrastructure and policies,” emphasizing that since the summer time natural gas and coal costs are up triple digits versus a 28% increase for crude. The Prince stated “28% is nothing compared to 300%.”

Wow!

Continuing with the theme of “What a Week,” Virginia Democratic Congresswoman Abagail Spanberger again criticized the far-left agenda of her party stating it could end in electoral disaster. She appeared in a NYT article with West Virginia Democratic Senator Joe Manchin.

Ending on the theme of “What a Week,” the Bank of England (BOE) shocked markets by putting concerns about slowing growth above predictions for a spike in inflation, sending global yields plummeting.

US 5-year Treasury yields plummeted 10 basis points, the largest decline since March 2020. According to Bloomberg, the Market is no longer expecting a rate increase in 2022, pushing expectations out to 2023.

Wow! Talk about the volatility of change!

Commenting on yesterday’s market action, oil ended lower by 2% as the market is suggesting the President will release oil from the strategic oil reserve to combat higher prices. A major issue at hand that such is only a short-term fix. Second these reserves are at the lowest level since 2003.  Will the Administration regret the release today if supplies are very tight in the winter?

Equity markets were bifurcated. The plunge in short term rates supported the NASDAQ as this index closed about 0.80% higher. The Dow closed about 0.25% lower.

Last night the foreign markets were mixed. London was up 0.63%, Paris up 0.62% and Frankfurt up 0.23%. China was down 1.0%, Japan down 0.61%, and Hang Seng down 1.41%.

The Dow should open flat but his could change radically given the potential significance of the 8:30 data. The 10-year is off 1/32 to yield 1.53%. Oil is up about 1%.

 

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