US stocks finished in the green on Wednesday as markets parsed the latest available information for insights on the strength of the US economy and the monetary policy outlook by the Federal Reserve.
The S&P 500 and the Nasdaq 100 added 0.4% and 0.5% respectively, while the Dow added 55 points.
The number of workers on payrolls will likely be revised downwards by 818,000 for the year ending in March, or around 68,000 less each month.
The revision coincided with signals of incoming rate cuts by FOMC members per the latest minutes release, with policymakers noting that a September cut is likely appropriate.
On the corporate front, Target added 11.2% on strong second-quarter earnings, but Macy’s fell 12.9% after lowering its guidance.
The Bureau of Labor Statistics (BLS) revealed a big downward revision to the job growth picture.
The annual revision of 818,000 jobs was the largest negative one-off adjustment since 2009 (the depths of the financial crisis). If we distribute that equally across, already twice revised, job growth data for the twelve months through March of this year, we get the chart below …
From this chart, we can see the initially reported nonfarm payroll series of data in blue (and the 12-month average). And after all revisions (including yesterday’s adjustment), we get the red line (and the adjusted 12-month average).
In short, the initial payroll numbers were overstated by an average of 100,000 jobs a month.Â
Remember, the Fed has been mandated by Congress, to pursue both price stability AND maximum employment.
By holding interest rates too high for too long, the rate-of-change in the unemployment number and this weaker job growth picture suggests they've traded one problem (inflation) for another problem (unemployment).
Let's hope they haven't traded an inflationary boom for a deflationary bust.
In the case of the latter, as I've said here in my daily notes, we would be getting all of the debt from the trillions of dollars of government spending ("stimulus"), all of the devaluation of purchasing power of our money, and only a fraction of the growth.
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