Friday Morning's Employment Number Could Restore the Gloom (And Other Market Thoughts)

by: Bob McTeer

I went to the movies yesterday afternoon and saw, Limitless—PG-13 of course—to see how the main character deals with a serious case of writer’s block. Not very well, since pharmaceuticals were involved. However, I recently tried one of those little 5-hour energy shots without apparent adverse consequences.

It’s not that there’s no news to write about, but that so much of it seems to “go without saying.” For example, to make much of the sharp decline in silver, gold, oil and other commodities is to imply that they weren’t obviously in a bubble. Funny how we excoriate our policy makers for bubbles past, but don’t urge remedies for bubbles currently inflating.

Then there’s all the to-do that’s been made lately over the devastating decline in the dollar, usually illustrated with a graph that begins at the height of its crisis-induced safe-haven high. The dollar is pretty much where it was before the crisis.

Then there’s the recent excitement over the euro’s strength, even though it’s considerably below its pre-crisis high, and the tougher stance of the ECB, as if its entire history hasn’t been marked by barely disguised Buba envy. That’s Buba as in the Bundesbank; not Bubba as in yours truly. Yesterday, the absence of the usual tough talk by Mr. Trichet sent markets into a dither. Perhaps it’s time to pass the ECB torch from a Frenchman to an Italian, anything but a German.

I was a bit surprised at the weakness of the 1st quarter real GDP number of plus 1.8 percent. That was because the 4th quarter number of 3.1 percent so understated the 4th quarter strength because it was cut by more than half by declining inventories. The weak 1st quarter number actually benefited from inventory accumulation, going back to the quarterly pattern prior to the 4th quarter. It’s looking like the 4th quarter was the anomaly.

While I’m getting ahead of Friday morning’s official employment numbers, I’m guessing, based on the new claims numbers, that a similar patter will show up there. In recent months (one in particular) the household survey was considerably stronger than the establishment survey, accounting for the faster than expected decline in the unemployment rate. I hope I’m wrong, but I’m afraid the Friday morning number will restore the employment gloom.

I’ve been thinking about the “historic” Bernanke press conference, and have had little to say because I thought it was a tour de force, and who wants to hear that from me? There was one comment, however, that may be worth exploring in a separate post if and when the block goes away.