David Stockman points out that last week’s news of a surprisingly strong gain in payrolls in December is primarily due to seasonal adjustment. The impressive 292,000 seasonally adjusted surge dwindles to a tepid 11,000 advance in unadjusted terms. He’s rightly skeptical about the value of viewing economic data over short-term windows through a seasonally adjusted lens. What he doesn’t mention is that the antidote to noise, at least in part, is the year-over-year comparison. Watching job creation (or the lack thereof) by this yardstick is a useful and generally reliable filter for monitoring the trend. In fact, looking at the latest jobs report in annual terms for raw and seasonally adjusted results reveals virtually identical gains: roughly 1.9% advances on both counts in December vs. the year-earlier level.
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The year began with a thud for most of the major asset classes, based on total returns for a set of proxy ETFs. Investment-grade US bonds edged higher in the first five trading days through Jan. 8. Thanks in part to a slightly weaker dollar last week, foreign government bonds in developed markets and foreign junk advanced slightly as well. But the red ink was otherwise dominant.
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● Robust US payrolls in Dec brighten economic outlook | Reuters
● Consumer Borrowing in US Rises at Slowest Pace in 10 Months | Bloomberg
● US Wholesale Inventories Unexpectedly Drop 0.3% In Nov | RTT
● Why the Fed needs to prepare for the worst right now | Larry Summers (WaPo)
● Are we in a recession already? Not yet | MarketWatch
● China Inflation Rises Slightly In Dec, PPI down | RTT
● China Retreat From US Bonds Prompts Shrugs | Bloomberg