Today we got exceptionally strong job report, 180,000 new jobs created. Even residential construction was quite strong. The unemployment is at 4.4% – workforce is getting more expensive and hard to find, which is bad for productivity.

For reference, the last time unemployment was below 4.4% was in May 2001, two months already in the recession. The employment peaked around 3.9% in December 2001, 2 months before recession started. If history is teaching us anything, we can expect the employment to peak 2 months before the start of the next recession and remain strong another 2 months after recession starts.

The only thing we can say for sure is that the recession is unlikely to start in the next 2 months, which is until June.

The bond market reaction was tough, 10-year note jumped to 4.75%. As mortgage market is linked to this rate we can expect Feds to talk hawkish in order to convince market that they are watching inflation. I doubt they have any way to prevent the coming recession – the choice they have is what kind of recession we will get: stagflation or disinflation. Right now the way to go is be hawkish, which is not good for stocks.

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