There is this weird twisted theory in existence since 1988 that no matter how stupid the US equity, real estate, and bond markets get, the Federal Reserve will bail them out.
After the collapse of 1987, Gulf War 1, LTCM, the .com fiasco, the GFC, 2012’s normalization election fake out, and of course the 2016 Hillary Coronation that wasn’t, it’s hard to not believe traders and the big banks might just have a case.
Before these pages reveal their prediction for tomorrow morning’s soon to be revised numbers, here is a bit of history as to what happens in some December NFP reports from the BLS; many of which are quite volatile.
All charts below provided courtesy of TradingEconomics.com.
1980 The Volcker Nightmare
By 1980 the Fed Funds Rate was accelerating faster than a Space X launch. Inflation was way ahead of the markets as far as inflicting pain on the middle class and the economy as a whole. The December 1980 reading did not indicate any hint of that would impact the incoming Reagan administration nor would there be a problem with employment growth.
2004 Greenspan’s Put Report
The economy was recovering from the massive .com bust and the middle class gave a sigh of relief as the moron Kerry did not defeat the other moron, Bush who was running for reelection. The Greenspan and Congressional idea of over-stimulating the housing market to accelerate an economic expansion and recovery was starting to take effect. The belief was that housing would never create an inflationary market after the revised measurement methodology was implemented.
2007 The GFC Monster Awakens
Despite popular belief that the NBER only declares a recession when employment deteriorates, December of 2007 is when they declared the start of the Great Financial Crisis recession and guess what?
From the NBER website on December 1, 2008:
The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of US recessions. The committee determined that a peak in economic activity occurred in the US economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.
Emphasis was yours truly of course. So one does not have to witness a decline in the NFP payrolls to validate the recessionary period has begun, just for the record.
2016 Hillary’s Happy Days Aren’t Here Again
I guess the firework show she planned was going to add 0.2% to the participation rate or something?
There was a designed effort by the economists in that time period from 2009-2017 to ensure that nothing bad happened during President Obama’s reign.
Mission was seriously accomplished.
Since President Biden is of a similar ilk, basically filled with Obama acolytes, does anyone seriously think a negative reading will accompany his exit with tomorrow’s report?
No one serious about America’s political and economic reality should. The consensus estimates are for a report reflecting an increase of about 155,000 new jobs created. Remember however, this is before revisions to revisions of benchmark revisions followed by annualized revisions of revisions.
Thus, tomorrow’s nonfarm payrolls prediction from this page is as follows:
NFP Jobs Creation: + 207,000
U-3 Unemployment Rate: 4.2%
U-6 Unemployment Rate: 7.5%
This will be a shocking number to many but with the late Christmas retail season layoffs probably did not begin until after the survey period. Add in the lower number of individuals seeking new employment, if one is to believe the JOLTS nonsense trajectory, and the weekly claims data and it’s hard to believe a negative or weak print is even remotely possible. Revisions in 3-4 months will probably reflect something far different, but in the interim prepare the defibrillator as this will be a painful number creating a sell-off in the bond market and panic in equity insanity land.
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