Jobless Claims (New Claims) are up again, but the market is still shrugging it off.
I'm nowhere near as certain about tomorrows employment number as I was last month, and I am cautious about taking a position into the number. However, the headline nonfarm employment change is predicted at around +100K. This isn't quite as silly as the +118K estimated for the August figure reported the first week of September this year, but I'm still expecting a lower number.
For what it is worth, the Fed is perhaps less likely to cut rates now that the petrodollar states, the BoE, and the ECB have declined to follow suit. Any rate cut is already priced into the market - we're not going to get another cut of 50 basis. An employment number less than +90K tomorrow is going to bring the market to its knees.
The exception to this would be another negative number, which might provoke a stubborn bullish reaction as the Fed might need to cut rates further than first expected. My money is on a number between 40K and 70K.
Last month I predicted around 40K (not 118!) but was surprised with -4K. For what it is worth, I think the market is getting too optimistic pricing in such a large improvement in payrolls, especially given the weekly jobless claims are up again.
USD looks bearish in the longer term, however perhaps there will be some unwinding of short positions before the number. After, who knows? The US economy is in tatters, and this will continue to show in the employment situation. Higher unemployment will lead to greater credit defaults. They are not out of the woods yet.
It is nice to see other central banks reacting more sanely and not just recklessly cutting rates. As I type this, the Dow is looking to open higher despite new jobless claims being several thousand above consensus. This will be corrected into EOW after payrolls tomorrow.
