ON DECK FOR FRIDAY, FEBRUARY 2
KEY POINTS:
- Tech earnings buoy risk sentiment…
- …as markets await nonfarm payrolls and wages
- Why US nonfarm payrolls face even more uncertainty than usual
- Tentative evidence is confirming my bullish Canadian housing narrative…
- …that is part of the narrative that portrays cut pricing to be offside
US tech earnings are supporting risk appetite ahead of nonfarm payrolls and wages. There was nothing else by way of material developments overnight. Canadian housing developments are flagged below.
Here is a preview of the establishment (aka Current Employment Statistics) and household (aka Current Population Survey) surveys of US job market conditions for January (8:30amET). The normal elevated uncertainty having to do with high statistical noise at the best of times is going to be even greater this time.
Consensus median: 185k
Consensus mean: 196k
Scotia: 220k
Range: Most are within 140k – 240k which is well within statistical noise bands
Whisper number: 213k
Std dev: 41k
90% confidence interval: +/-130k (ergo noisy!)
Wages: 0.3% m/m SA // Scotia 0.4% m/m
UR: 3.8% // Scotia 3.7% from 3.7%
Watch for annual benchmark revisions that adjust SA factors for payrolls. Watch for fresh population estimates that could drive revisions to the companion household survey from which the UR is derived. Control for potential weather effects.
As for what we can piece together from other advance labour market readings, here’s the list:
- Consumers said jobs were materially more plentiful in January as the jobs plentiful reading within the Conf Board’s consumer confidence gauge jumped by 5.1 points to its highest reading since last June.
- JOLTS job vacancies increased in December. They are well off the peak, but still well above pre-pandemic levels (chart 1).
- The NFIB small business measure of jobs hard to fill fell a point to its lowest since January 2021. The NFIB’s hiring plans index fell two points to its weakest since May 2020.
- ADP private payrolls were up by just 107k. Lots of head fakes in terms of the relationship to nonfarm private payrolls.
- Challenger layoffs increased to 82k in January from 35k but they are not seasonally adjusted (chart 2). The same thing happened at the start of last year. What I think is happening is that companies hired so many workers out of the pandemic and then as they reported full year earnings and conducted performance reviews they’ve been engaged in greater than normal culling of the workforce at the start of each year. I would caution against declaring a trend.
- Initial jobless claims were little changed between the December and January nonfarm reference periods (the pay period including the 12th).
On a totally different note, I'm hearing of more and more bullish Canadian housing facts that play to my narrative that the BoC is going to be caught flat footed into the Spring market once again. On the heels of an 8.7% m/m SA jump in Canadian existing home sales in December that was the hottest gain since last April’s surge, the tentative evidence is pointing toward a continuation of strong momentum.
1. I'm hearing multiple anecdotes of soaring mortgage applications across the street and desks.
2. Calgary home sales during January sound like they were strong, pushing months supply down to 1.3 months nearing 2006 lows (here). 1.3 months!! Vancouver and Toronto should be out next week.
3. Check out the bidding frenzy that occurred at this pretty average home, albeit distorted by a list-low sales tactic.
As for the drivers? This has nothing to do with a Spring or mid-year rate cut that's not gonna happen anyway. This is about mismanaged and grossly excessive immigration, lean supply, 1st time buyers amassing bigger down payments to capitalize upon slightly cheaper prices, ripping wages, a strong job market, seasonal demand, and better household finances than often portrayed.
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