The S&P 500 (SPY) finished the day little changed, up just about 20 bps. Rates saw the biggest move, reversing course and finishing the day lower despite a blistering-hot ISM Manufacturing Prices Paid Index. The turn appeared to coincide with the Treasury increasing today’s buyback of 10- to 20-year issues to $6 billion. There was also plenty of supply offered into the operation, with more than $46 billion of securities offered for Treasury to purchase.
So much for the Fed and its policy of no forward guidance. So far this week, the Fed’s Williams and Jefferson have both said they’re in no rush to raise rates. For a central bank that is supposed to be in the business of providing no forward guidance, their comments this week sure sound a lot like forward guidance.
Tomorrow’s jobs report will say a lot about that. While the jobs report has become almost as unpredictable as the JOLTS report these days, data from Revelio Labs, along with ADP, suggest that job growth has been improving. That could point to a stronger number tomorrow, and with estimates calling for just 90,000 jobs to have been created, the bar for a beat is fairly low.
I’d also keep a close eye on the unemployment rate. Remember, the unemployment rate is calculated as the number of unemployed people divided by the labor force, which includes only those who are employed or actively looking for work. That means the unemployment rate could fall for two very different reasons. First unemployed people could find jobs, which would be a sign of labor-market strength, or unemployed people could stop looking for work and leave the labor force, which would also push the unemployment rate lower but for a much less encouraging reason.
Last month, the number of people not in the labor force increased, which has not been the broader trend. So tomorrow, it will be important to look beyond the headline unemployment rate and see how people are moving between employment, unemployment, and not being in the labor force.
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