NFP Day

As we noted yesterday,
I am flipping from the usual bet of taking "the Under" on NFP. This month, I
will make the guess that the NFP exceeds the consensus of 200k.

Of course, the monthly initial number is fairly meaningless; What
matters more is the overall trend, how that trend compares to prior
recoveries, and what wage data looks like. The knee jerk trading
response is pretty silly, and can often be "faded" when excessive.

Since the Fed has stated they are now in that "Data Dependent Phase," the NFP numbers take on an even greater significance. A weak number will give hope to the "One & Done" crowd;  A too strong number might dash those hopes.

Instead of Fed obsessing, however, I’d like to point out a specific oddity about the recent trading action:

• Gold has risen to 25 year highs;
• Oil has rallied up from high $50s to near $70;
• Interest rates on the 10 year are approaching 5%;
• Equities have rallied to 5 year highs.

A friend has commented that "Equities are the odd man out;" Instead, I’d point out that this foursome doesn’t make a whole lot of sense marching in lockstep; Usually, Oil, Gold and Yields do not rally in concert with equities. So short term, I would expect this group to diverge — either Equities keep rallying and the other 3 back off, or vice versa . . .

>

UPDATE April 7, 2006 9:52am

My friend Brian Reynolds writes:

March NFP came in at 211k vs. the Bloomberg consensus of 190k. After revisions, the number was 13k below expectations, which is about as close as this number comes to consensus.

However, aggregate hours worked were strong, and revised up, so we would say this report is a slight beat, indicative of a strong economy with more tightening to come.

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