Breakfast Bites - US Payrolls Revision in Focus

Rise and shine everyone.

A bit of important news this morning. At 10 am ET we will receive annual revisions to the non-payroll dating back to April 2023 from the BLS. Given that the labor market is now a major focus this data could be an important factor that moves the market.

The revisions will be important to determine the extent of weakness in the labor market. Remember, though revisions go either way, and therefore it’s important to be careful. According to Goldman Sachs, this could be the biggest downward revision in over 7 years. so brace yourselves.

Yesterday we had the first red close for the market since the severe drawdown in early August. As we approach Jackson Hole, it’s quite likely that volatility will start to increase again, but that doesn’t mean that prices cannot rise as well.

We got some good news from Target this morning reaffirming what Walmart said. revenues have improved and the stock is trading 14% higher in the premarket.

Later this afternoon, the FOMC minutes will be released at 2 pm ET. Again the focus will likely be on any discussion about the labor market and the degree of concern that the FOMC members have expressed about that.

US Equity Futures are trading back higher this morning. The US Dollar index continues to remain in the 101 zone. Commodities other than gold are trading higher.

More on the Nonfarm Payroll revisions

The BLS reports that 2.9 million jobs have been added between April 2024 and March 2024 - that’s an average of about 242k jobs per month. According to JPM, even a -1 million revision lower would amount to about 158k jobs per month which is a robust level of hiring.

JPM estimates the revision to be about -360k or -30k per month, which is about -0.6%. The normal range of revisions for the BLS is -0.3% to +0.3%. So this puts the revisions outside the normal range but certainly not very alarming according to JPM. The last time we had a major revision was in 2009, when the revision was about -900k or -0.7%.

Goldman Sachs on the other hand sees the revision in the range of 600k to 1million which is a 50k to 85k downward revision per month. This would of course be a more significant level.

Bottom line: A downward revision will likely see the market go lower. As the data gets parsed however, the severity of the revision will determine how quickly the market bounces back.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)