Revisions, resilience, and affordability

Daily update

The US employment report offered few reliable facts for investors, other than the reminder that data is revised a lot. If markets listened to economists with the reverence they deserve, that would not be a surprise. Markets were surprised—revisions suggest a weaker employment position. The sense of an affordability crisis is likely to be reinforced—wage growth after adjusting for inflation is near zero, and after adjusting for inflation perceptions is probably negative.
US consumers still have savings to spend, and savings rate estimates have been revised higher. That suggests actual spending stays resilient. US central bank officials have been offering forward guidance (not Fed Chair Warsh, who remains obstinate in silent obscurity). The tone suggests one further hike, but little urgency.
Brazil’s first round presidential election gave a surprise lead to the right wing challenger Bolsonaro, who now faces President Lula in a second round vote. Markets are likely to price in a Bolsonaro victory. The global implications are limited, although the trend to vote against incumbents is reinforced.
The euro has weakened, with a tendency to blame the French for this move. French fiscal policy has dominated the narrative, but France’s debt-to-wealth ratio is far more favorable than, say, that of the US.