Jobs Data Harbinger
Will This Make the Fed Nervous?
Thursday’s ADP private sector employment report came in above consensus along with Wednesday’s JOLTS survey. Out of these studies, ADP has the more current data (December) while JOLTS lags with November surveys. However, JOLTS remains a favoured measure for the Fed.
In November, overall job openings stood at 10.458M vs 10.000M estimate. That’s roughly 1.7 available positions for every unemployed person looking for work in the US. However, this figure is based on very questionable reporting, as we’ll discuss a little later. Stick with me on this!
The ADP report showed that overall, private payrolls added 235k jobs in December, but large companies (500+) saw a drop in employment of 151,000 jobs.
There was also a deceleration in wage growth, with a median increase in annual pay of 7.3% vs. 7.6% in the prior month for workers who maintained their positions. This will provide some encouragement for the Fed as their activity is resulting in wage softening (good for inflation).
Friday’s NFP report is expected to show that the US economy added 200,000 jobs in December, with unemployment rate holding steady for the third-straight month at 3.7%.
The view is that this number is still way too high for the Fed to think about loosening its borrowing/lending policy.
“The Federal Reserve would like to see a [monthly job growth] number closer to 100,000 or below. That’s more in line with a clearly cooling labor market.”
~ Nick Bunker, Indeed Hiring Lab
Given the strong reports already out this week, will we get an upside surprise? It’s quite possible. However, as we’ve previously discovered, these BLS labour surveys are suspect at best. Survey participation has plummeted over time, making the data a lot less reliable.
“It is the JOLTS report that really caught my eye… JOLTS response rate has collapsed from 44% to 31% since 2021, at a time when job openings surged to 12 million from 7 million… How accurate is the surge in 5 million additional job openings, when there are 1/3 fewer respondents?”
~ Tom Lee, Fundstrat
In a note to investors last month, Tom Lee suggested that the JOLTS survey may be overstating how tight the labor market is in reality, and that could challenge the Fed’s policy to continue tightening financial conditions and raising interest rates.
Lee believes there may be far fewer job openings than JOLTS suggests, and that it could result in the Fed changing its future rate hiking trajectory.
Question everything you see…
Technical Analysis Corner
BTC Daily Chart
BTC is stuck in an a tight range, even on the daily chart. There’s not a lot to be said here, but diagonal support at 16.6 needs to hold and 16950 must be reclaimed for further upside. We’ll look at the next levels on the 4H chart below.
BTC 4H Chart
BTC is forming a nice channel here with mid-range support around 16.6. A successful reclaim of 16950 leads toward 17280 and 17600, 18060 next. Failure to hold 16.6 brings 16.3 into play again.
BPRO signaled strong bull divs the last two times it touched range lows, so I’ll be looking out for that again.
SPY Daily Chart
The S&P500 has really tightened up its daily range as well. Initially I was looking for some movement between the two .50 fibs, but this price action has increased the short-term downside risk. However, that depends which way the market decides to move off today’s jobs report.
I’d actually be more bullish on a nice bounce setup across the board if this wicks down to the .70 fib. Nothing bullish longer-term until the downtrend diagonal breaks out.
BTC.D Weekly Chart
Bulls lacked follow-through and we’ve got an initial rejection at the weekly resistance. I won’t be surprised if this breaks out soon, but patience is needed. I do believe that would result in most altcoins losing value. But again the chart is at resistance, so we can’t jump to conclusions yet.
DXY Daily Chart
The dollar index is expressing strength and should keep going if 105.15 turns to support. This would put pressure on crypto. Again it is dependent on today’s jobs report.
That’s all for today. Have a great weekend!
Jay Charles
Editor in Chief, The Trading Tank.
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