Non Farm Payroll Data from BLS
This Friday, the much anticipated non farm payroll report comes out. This data is provided by the US Labor Department, Bureau of Labor Statistics. Estimates are for 225,000 new jobs created in February. Nonfarm payroll employment increased by 146,000 in January 2005.
This reminds me of April 2, 2004, when the March 2004 non farm payroll report came out. Estimates called for 150,000 new jobs in March. The report released showed that the US economy added 308,000 jobs in March 2004, the largest gain since April 2000. The released number was over twice the estimate. The actual revised number was 320,000. Increasing employment meant economic activity, which leads to inflation and interest rate increases.
The bond market had an immediate knee jerk reaction, and bonds were slammed. In early May, the April number showed another increase of 337,000, the market finally bottomed on May 13th, after 6 weeks and an 11.5% drop. Since May 13, 2004, the bond market has had a party, reaching a new peak on February 9th, after a 16% rise. In the last 15 trading days, the bond market has dropped 5%.
What will another surprise in the non farms report do to the markets?
Anything over 250,000 could cause an initial knee jerk down in stocks and a longer bond market slam. Over the next several weeks, money would flow from bonds to non interest rate sensitive stocks, this would push stocks back up after the initial hit and later possibly to new highs. Interest rate sensitive stocks would get slammed, negating some of the upside effect on the indices.
A surprise to the downside could cause a rally in the bond market and interest rate sensitive stocks. This could also cause a slight increase in the indices. A just right Goldilocks number may cause a drop in long term interest rates and cause a slight increase in both the bond and stock markets.
See: January 2005 Non Farms Payroll Report
ftp://ftp.bls.gov/pub/news.release/empsit.txt
This reminds me of April 2, 2004, when the March 2004 non farm payroll report came out. Estimates called for 150,000 new jobs in March. The report released showed that the US economy added 308,000 jobs in March 2004, the largest gain since April 2000. The released number was over twice the estimate. The actual revised number was 320,000. Increasing employment meant economic activity, which leads to inflation and interest rate increases.
The bond market had an immediate knee jerk reaction, and bonds were slammed. In early May, the April number showed another increase of 337,000, the market finally bottomed on May 13th, after 6 weeks and an 11.5% drop. Since May 13, 2004, the bond market has had a party, reaching a new peak on February 9th, after a 16% rise. In the last 15 trading days, the bond market has dropped 5%.
What will another surprise in the non farms report do to the markets?
Anything over 250,000 could cause an initial knee jerk down in stocks and a longer bond market slam. Over the next several weeks, money would flow from bonds to non interest rate sensitive stocks, this would push stocks back up after the initial hit and later possibly to new highs. Interest rate sensitive stocks would get slammed, negating some of the upside effect on the indices.
A surprise to the downside could cause a rally in the bond market and interest rate sensitive stocks. This could also cause a slight increase in the indices. A just right Goldilocks number may cause a drop in long term interest rates and cause a slight increase in both the bond and stock markets.
See: January 2005 Non Farms Payroll Report
ftp://ftp.bls.gov/pub/news.release/empsit.txt
Comments