Revised Jobs Data Could Be the Bear That Knocks on Goldilocks' Door
Employment numbers could be slashed by a third, as overbought patterns remain and sluggish seasonality looms.
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The market finally rested on Tuesday, but the big question now is whether it can continue to run higher as investors embrace a "Goldilocks" economic narrative. It is widely expected that Fed Chair Jerome Powell will signal rate cuts when he speaks on Friday at Jackson Hole, concerns remain about economic slowing, which triggered ugly corrective action two weeks ago.
The Bureau of Labor Statistics at 10 a.m. ET will reveal revised payroll data for the 12 months ending March 2024. The new numbers are expected to show as many as a million fewer jobs than initially reported.
Data now shows that 2.9 million jobs were added in the year that ended in March 2024. This revision could wipe out nearly a third of those jobs and paint a very different picture of economic strength.
Weak jobs data created a mini-market panic two weeks ago and triggered calls for an emergency interest-rate cut. That was quickly shrugged off, but a big headline about negative job revisions on Wednesday could cause renewed concern.
While the Fed is already very likely to cut rates, the issue that will worry the market is whether it is behind the curve. A half-point cut may signal a lack of Fed confidence in a soft economic landing and have negative market implications.
The Labor Bureau revisions will set the stage for Powell on Friday morning. The market has been anticipating something friendly from the Fed, but it has been such a big run that much good news has already been discounted. We now have a substantial risk of some "sell the news" reaction, no matter what Powell might say. It doesn’t help matters that we have the danger of negative seasonality lurking.
Technically, while the market has enjoyed strong momentum and cut through significant overhead, many overbought patterns show a need for rest. This setup makes it more likely we get negative reaction to news flow.
I’ve been raising some cash recently and reduced some of my winning positions as I find it harder to spot good entry points for stocks that I like. I’m not bearish but market conditions are making it much harder to stay heavily long after this tremendous run. The market could easily trend higher, but the charts do not offer many prudent entry points.
We’ll see what happens on the jobs revision news, and then come the Fed minutes later on Wednesday that could trigger some speculation about what Powell will say on Friday.
At the time of publication, DePorre had no position in any security mentioned.
