What Happens After the Employment Report?

February 1, 2018 11:46AM CST

The consensus for tomorrow’s monthly update on the employment situation is for the January payroll to have grown by 175K compared to the December report of 148K jobs. The unemployment rate is expected to remain unchanged at a 17 year low of 4.1%.

After the release of the report we will see how the financial markets respond if the payroll number is widely outside of the consensus range of 150K to 205K. A number above 205K should continue to add downward pressure on treasuries and further support the equites “super bull’ market.

The recent market action of the US Dollar Index is the biggest surprise for me, as far as the weakness in that market goes. Maybe a good number tomorrow will be what the buyers need to come in and support this range around .8825 to .8850. The Fed has indicated a slightly more “hawkish” posture, suggesting possibly four rate hikes this year. We’ve heard that before and the Fed has yet to increase the pace of rate hikes. In fact, I believe that inflation will overheat before the Fed realizes that they are moving too slowly.

I’m looking for a payroll number north of 200K and for treasuries to continue a long term trend down and equities to continue the long term bull run to yet more new all-time highs. I think gold will eventually find some good buying at $1,330. Overall I’m bullish commodities as I expect inflation to grow rapidly this year.

 

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