There is a big economic calendar competing with mid-term election campaign stories. The increase in hourly wages in the employment report offset some market enthusiasm about continuing job market strength. With inflation concerns on a hair trigger, expect special focus on this week’s PPI and CPI. The Beige Book and JOLTS report will also get pundit scrutiny. Expect pundit focus to be on Inflation Watch.
Once again, this is the wrong emphasis. More on that below.
Last Week Recap
In my last edition of WTWA I provided a preview of the focus on jobs. This was an accurate (but perhaps obvious) call. I added some value by explaining why a good report might not be celebrated by financial markets.
The Story in One Chart
I always start my personal review of the week by looking at a great chart. I especially like the version updated each week by Jill Mislinski. She includes a lot of valuable information in a single visual. The full post has even more charts and analysis, including commentary on volume. Check it out.
The market lost 1.02% on the week, edging lower each day. and has reached a new all-time high. The weekly trading range was about 1.5%, still very low. I summarize actual and implied volatility each week in our Indicator Snapshot section below. Volatility remains well below the long-term average.
Noteworthy
Football season has arrived, commanding the full attention of Mrs. OldProf. You may recall that she grew up in Green Bay and is a very knowledgeable fan. (Can you name the positions of all NFL officials in a game. Do you even know how many there are?) Priceonomics has a chart pack based upon data from Seat Guru. They use this to identify the basic fan base by county. Check out the post for some fun with interactive charts and to check out your favorite team. Here is the basic map. It lacks a green dot in Naperville.
And what about fake fans lobbying for the blackout rule (now gone). (WSJ) Bilbo Baggins? (Mrs. OldProf expresses astonishment). Luke Skawalker? Vladimir Stolichnaya? A tried and true methods for a letter-writing campaign has now turned to email.
The News
Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.
When relevant, I include expectations (E) and the prior reading (P).
The Good
Employment news was solid.
- Non-farm payrolls increased by a net 201K but included revisions of -50 K in the prior two months.
- Unemployment remained at 3.9%. The Atlanta Fed has an interesting online calculator allowing the user to estimate the time needed to reach a particular unemployment rate. The user can adjust the labor force participation rate and some other key variables.
- Initial jobless claims reached the lowest level since 1969, 203K. (Bespoke)
The Bad
The Ugly
Health care administrative costs. This is a key element of consumer inflation. US costs are “uniquely high.” These costs comprise as much as 30% of total costs. Administrative expenses might be justified by preventing fraud and managing care. The tradeoff begs for further analysis. (Joshua D. Gottlieb and Mark Shepard – Econofact).
The Calendar
There is a big calendar featuring inflation data. The JOLTS report also provides important inflation information via insight into the labor market structure. Retail sales also has special importance. With mid-term election season in full swing, there will be plenty of political news. Some will even have market relevance.
Briefing.com has a good U.S. economic calendar for the week (and many other good features which I monitor each day). Here are the main U.S. releases.
