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The Return Of The Perfect Payrolls

Jeffrey Snider profile picture
Jeffrey Snider

By Jeffrey P. Snider

Over the past two days, Chinese exports exploded, US payrolls bested 300k, and China's CPI recorded the hottest inflation in five years. Globally synchronized growth? It's times like these where remembering how nothing goes in a straight line helps settle and ground interpretations. In thinking that way already, you are never surprised when there are good even perfect data reports on occasion the way policymakers are always surprised with "unexpected" bad ones. We are in a global upturn, after all.

The question, as always, is whether these things represent a meaningful shift. The inflation/boom scenario is one where the economy doesn't just meander at low level positives but accelerates forcefully into an inarguable growth period - something we haven't seen anywhere for more than a decade.

It might be tempting to view this recent positive report cluster in that way, but, again, we've seen these before. It's not just one month that is required to suggest what everyone is looking for. These have been over the past few years rather easily explained by outliers (China exports), noise (payrolls), and statistical difficulties (China CPI). We will know things are truly picking up when the bad months are what become attention grabbing for their infrequency.

Each of these data points deserves individual examination, so I'll leave the two China series for later. Taking US payrolls first, it was a nearly perfect report. That in itself tells us very little. These had been almost common in 2015 and early 2016. As I wrote in January 2016 for the December 2015 BLS estimates:

I think it entirely fitting, even useful in the long run, that December's payroll report was yet another perfect month; the fourth of 2015 by my unofficial count. There was absolutely nothing wrong with any of the components, at least in the

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Jeffrey Snider profile picture
As Head of Global Investment Research for Alhambra Investment Partners, Jeff spearheads the investment research efforts while providing close contact to Alhambra’s client base. Jeff joined Atlantic Capital Management, Inc., in Buffalo, NY, as an intern while completing studies at Canisius College. After graduating in 1996 with a Bachelor’s degree in Finance, Jeff took over the operations of that firm while adding to the portfolio management and stock research process. In 2000, Jeff moved to West Palm Beach to join Tom Nolan with Atlantic Capital Management of Florida, Inc. During the early part of the 2000′s he began to develop the research capability that ACM is known for. As part of the portfolio management team, Jeff was an integral part in growing ACM and building the comprehensive research/management services, and then turning that investment research into outstanding investment performance. As part of that research effort, Jeff authored and published numerous in-depth investment reports that ran contrary to established opinion. In the nearly year and a half run-up to the panic in 2008, Jeff analyzed and reported on the deteriorating state of the economy and markets. In early 2009, while conventional wisdom focused on near-perpetual gloom, his next series of reports provided insight into the formative ending process of the economic contraction and a comprehensive review of factors that were leading to the market’s resurrection. In 2012, after the merger between ACM and Alhambra Investment Partners, Jeff came on board Alhambra as Head of Global Investment Research. Currently, Jeff is published nationally at RealClearMarkets, ZeroHedge, Minyanville and Yahoo!Finance. Jeff holds a FINRA Series 65 Investment Advisor License.

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Comments (9)

The Nattering Naybob profile picture
"Jerome Powell and the Fed's Greenbook claim there is wage-driven inflation imminent."

Along with those who have been driven to a vitiated state of half truths, and false doctrines by misinformed economorons, and a steady diet of MSM parrot food. All we can say is put down the crack pipe.
It appears that job growth deceleration and stopped and is going sideways. Time will tell.
diroha profile picture
It is a good number no doubt and the fact that the 10 yr stays below 3% is a flashing green light for equities. There is no way I am leaving equities to put money into the 10 year below 3%. The Fed is going to be required to let things run hot if they want a steep yield. If they tighten the short end too much they cause a slowdown and a flattener. The Fed is going to have to cross it's fingers and pray that inflation remains tame or only gradually increases.
10 year below 4.5%, no reason to leave growth equities.

10 year above 5%, then we will see some material impact...
Aricool profile picture
tariffs will increase inflation and decrease growth.
blocking immigration and deporting illegals will increase inflation and decrease growth.

these are effectively new taxes on the American people.

the fiscal stimulus of tax cuts will tend to increase inflation.

so, you got the Trump effective tax hikes nulling out his tax cuts to the wealthy, so growth is a wash, but both his tax hikes and cuts are pro inflation, thus a recipe for stagflation....

So, how should the Fed deal with stagflation, which seems to me to be a probable outcome?

all the while our debt spirals out of control, just to keep us out of deflation. maybe the bond vigilantes are circling in...
diroha profile picture
Your pathway of events is logical but CB's have a way of interfering with markets. They are very aware that a recession blows up the world because of all of the debt. The market has already priced in 3 hikes on the short end so the FED has a free"look" as to the consequences of these hikes over the next 7-9 months. The debt is only onerous if rates go up a lot. We all know repayment of the debt will never happen so it is just the cost of interest that is important.
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