Economic Review

3/30/2010

Will the Unemployment report be able to change some correlations between markets or will it simply be a yawner.

The hype for the upcoming jobs report has been set almost as if it was the NCAA Basketball finals of March madness. A majority of analyst are expecting a positive non-farm payroll increase of jobs. Estimations are coming in slightly positive to as high as the 300 to 400 thousands. Given all the hype about the rebounding economy, a positive showing on employment may just send the markets reeling in one direction or the other. However a few points to keep in mind involve the interrelationships between markets at this point.

Recently 10 Year yields have crept higher in reaction to the proposed end of Fed purchasing. Yields are not far from the 4% level, which has not been seen in some time. Additionally, short term rates have been waiting for any kind of excuse to rise in Yields as well. However, the question to keep in mind is, if by chance the employment report is a blow out on the upside (meaning an significant increase in jobs) what will the affect be in Treasury land (how high will yields rise) and would a pop on Yields be enough to put pressure on the lofty level of stocks. Just to add fuel to the hype is the fact that markets are closed for Good Friday holiday, so participants will have to digest things over the weekend.

What’s the Doc’s feel? There’s a lot of hype for a positive jobs number and there may very well be an increase in jobs due to the census hiring affect. However the idea that the economy is on some kind of robust pace of job creation is just a lot of bunk. If by chance Treasury Yields increase dramatically, it’s more likely the lack of Fed buying effect or from inflation expectations from printing gobs of $s rather than a strong economy effect. Bottom line….don’t get sucked into the hype.

Stephan Kudyba (MBA, PhD) THE MARKET DOCTOR

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