"Facts alone are wanted in life. Plant nothing else, and root out everything else. You can only form the mind of reasoning animals upon facts: nothing else will ever be of service to them."
Think on that. I lifted this line from the first page of "Hard Times," the Charles Dickens novel. How fitting that my mind returns to this novel that I had not thought of in years, on "Jobs Day" of all days, in an era that can be described as difficult, and at a time where it has become almost impossible to find hard news presented without agenda-driven opinion disguised as factual presentation. How fitting indeed.
Perhaps this is why as a child I first adapted to numbers. The written word came later. Numbers work, and they never lie.
Oh, I am not a fool, at least I hope not. Input can be incorrect, but output? Never mistaken. If done correctly, output never lies. Like baseball, or chess. Mistakes can be made along the way, but the result is the result that all, from rookie to manager, from novice to master, can see, and after some analysis, then learn to understand.
The written word is so different. A stylish talent (or lack of) developed in a different way. Whereas mathematics might represent pure logic, the essay must be colored with the occasionally sensational, or even the superfluous. Without the interjection of something additional to -- or even worse, the deliberate omission of -- "facts alone," the writer risks losing the reader, especially once that writer knows what a specific audience wants or expects. Objectivity becomes blurred. Hard news? Everyone I know believes something different. In a logical world, that's impossible.
Today is Friday, December 4th. Today is also November Jobs Day, the day that the Bureau of Labor Statistics (BLS) will release numbers for job creation, unemployment, underemployment, participation, and wages that will immediately make headlines, move the yield curve around, and impact whatever equity index futures are doing at the time. Numbers? Facts. Only, not really. We, as economists, use the Non-Farm Payrolls number as a proxy for job creation, even though that number is derived through one of two surveys that the BLS releases the results of simultaneously. This number comes through the "Establishment" survey and rarely compares in a logical way to the change in the number of employed persons that you'll find in the "Household" survey.
Both surveys are done too early in the month, both are just the result of asking a smallish sample of folks simple questions. The demand side of U.S. labor markets is asked how many individuals were added to or subtracted from payroll. The supply side is asked about their employment status. The numbers are then extrapolated far out, so as to prepare estimates that might be placed on the entire population of a large nation, and then that number is whacked by a seasonal adjustment that can appear almost arbitrary at times. That is the number you'll see at 08:30 ET. That number will move financial markets based upon its potential impact on both fiscal and monetary policy implementation.
At least the ADP release, which disappointed this week, is based on actual data before they add the salt and pepper. Remember, numbers are always logical. Numbers are always factual. Well, at least all output is the logical result of mathematics based on input. That's as far as I can go.
After the availability of vaccines returns secondary earners to the labor force, probably after the death of too many small businesses and ahead of most large employers being able to successfully determine forward-looking demand (and what they can afford), where will the unemployment rate (U-3) and underemployment rates (U-6) be? In other words, what happens if participation recovers as soon as minor dependents no longer need an adult in the home full-time, but employers don't want those folks back right away, or cannot pay them what they used to?
This will be the fundamental structure of the much talked-about "K"-shaped recovery. Real Money colleague Peter Tchir (who I will admit has always been the smartest man in any room where he and I have stood together) has been out and about discussing, taking a focused approach on improving conditions for the lower leg of the letter "K." I think everyone should be reading his stuff. Peter talks about turning the 'K" into a "diamond". Now, this raises another question.
Dancing With Fools
Ahead of Thursday afternoon's Pfizer (PFE) news (which really was not a surprise, if you have been following events, as the "news" is about three weeks old; my vaccine distribution estimates have been below where Pfizer is even now) that took the shine off of the day's rally, and then the Moderna (MRNA) news (on possibly conferring longer-term immunity) that gave cause for relief overnight, markets were trading higher based upon renewed hopes for fiscal stimulus. Suddenly, a bipartisan group of senators came up with a $908 billion targeted support plan that, from the left, Senate Minority Leader Chuck Schumer and House Speaker Nancy Pelosi sound somewhat interested in. From the right, Senate Majority Leader Mitch McConnell has offered mixed messaging.
Call me crazy (Sarge, you're crazy), but just ahead of the election, did not Speaker Pelosi come down to $2.4 trillion and the Trump administration's $1.8 billion bid end up almost laughed off by the House as too small? What the heck is going on here? A month after the election, the Speaker is willing to entertain a bid half the size of the one she would not consider good enough five or six weeks ago? (By the way, we used to love traders like that back in the "open outcry" days. Could get them to hit lower bids or take higher offers after pretending to walk away.)
McConnell, by the way, like him or hate him, has always been around $500 billion on this next package. Incredibly, he might be the only leader mentioned here who has not changed his stance to any significant degree based on politicking. In the meantime, small businesses, and households, especially single-parent households, are suffering. The pandemic rages on as the music begins. Happy holidays.
On the surface, a decent day. Most large-cap indices closed somewhere between unchanged and up small after hitting all-time highs earlier in the session. Small to mid-cap stocks outperformed the big kids. Breadth across New York's two primary equity exchanges was overwhelmingly positive in terms of winners over losers and advancing volume over declining volume. Aggregate trading volume moved sideways to slightly lower at both exchanges, which would indicate what we in the industry refer to as a stall. This is typically what happens when a news event puts a halt to a rally without completely killing that rally intra-session.
The thing is this: While it looks like it, I don't think we experienced a stall. Dissecting the action across the S&P 500 for Thursday, which closed essentially flat, one sees that trading volume increased significantly after the Pfizer news broke, but that (and this is a bit granular) "up" minutes over the final half hour occurred on ever-rising trading volumes, while "down" minutes really sagged for the most part in terms of trading volume. I think professional managers went hunting late on Thursday afternoon and those high-speed algorithmic traders that react so quickly to everything finally ended up as prey. Yummy. Score one for the human race. Best part is, these guys are busy watching 13-year-olds fall off skateboards on YouTube. They won't even know they got taken to school until Monday morning when they get yelled at.
November Employment Situation (08:30 ET)
Non-Farm Payrolls: Last 638K.
Unemployment Rate: Last 6.9%.
Underemployment Rate: Last 12.1%.
Participation Rate: Last 61.7%.
Average Weekly Hours: Last 34.8.
Average Hourly Earnings: Last 4.5% y/y.
Other Economics (All Times Eastern)
08:30 - Balance of Trade (Oct): Last $-63.9B.
08:30 - Factory Orders (Oct): Expecting 0.8% m/m, Last 1.1% m/m.
13:00 - Baker Hughes Oil Rig Count (Weekly): Last 241.
The Fed (All Times Eastern)
09:00 - Speaker: Chicago Fed Pres. Charles Evans.
10:00 - Speaker: Reserve Board Gov. Michele Bowman.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (BIG) (.66)