Unlike the key BLS revisions to April 2023-March 2024 payrolls estimates, at -818K the largest drop since the Global Financial Crisis, today’s Global Daily was released at the same time to all - nobody can call to get it early. Losing an average 68K from each monthly jobs report changes the macro picture; subtracting ‘migrant encounters’ starting in October 2020 as proxy for illegal immigration, the peak in cumulative post-Covid net payrolls growth was 7.23m in February 2023, then drifted lower, to just 6.38m as of July; or, does the BLS revision not matter because illegal arrivals are doing the jobs off book rather than US workers? But tell that to the US workers, if so.
Either way, I wear my “DM = EM” (developed markets = emerging markets) T-shirt and wish those thinking they know what’s going on in the US economy from looking at Bloomberg ‘good luck’. I’ve lived in and covered many EM, with eccentricities, conspiracies, and oddities: let’s see how those who’ve only lived in and covered DM cope if/as this structural shift continues.
Which includes the Fed. Their latest minutes show the vast majority of the FOMC opened the door to a rate cut in September, and a few were prepared to do it in July. Our Fed watcher Philip Marey has slightly revised his call ahead of tomorrow’s Jackson Hole central bank Powell-wow (which he previews). Philip still expects the Fed to start cutting in September, which he was saying while the market was screaming months randomly starting from “JANUARY!”. He still expects four 25bp cuts. However, he now thinks these will be in September, November, December, and January rather than stretched out until mid-2025. This is still due to “stag”, not “flation”. We were one of the first banks to forecast a US recession and remain one of the last to keep a mild recession pencilled in. Yet assuming Trump wins the election, the inflationary impact of his economic policies would force the FOMC to stop cutting at 4.50%. Most in the market are screaming lower Fed Funds levels randomly, starting from the figure which pushes asset prices up, or assuming the Fed will do it for them.