When good news and bad news look the same

Posted by: Paul Donovan

04 Oct 2019
  • Ordinary people have a touching belief that economic data is precise and accurate. Economists know it is neither of those things. Today's US employment report will be revised again and again. Nonetheless, markets will pay considerable attention, in the wake of soft sentiment data.
  • The US labor market does not have enough workers at the moment. A low payrolls number may be a signal of economic weakness (not enough jobs) or economic strength (not enough workers to join the payroll). The threat of more trade taxes is a serious risk to the US economy. US companies and consumers are hurt by these taxes. But the damage to sentiment is likely greater than the damage to the real world.
  • The interminably tedious EU-UK divorce continues. Of course. The EU is giving the UK a week to come up with revised proposals. Investors are ignoring these details because investors do not believe any of this is really real. The working assumption seems to be further delays.
  • US labor market data aside, today's data calendar is quiet. There is some noise from EU and US central bankers, which investors seem unlikely to focus on. Political noise in the US is not yet a market concern.

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