US JOBS DATA LESS BAD THAN MEETS THE EYE
Lombard Street Research
18 years of forecasting success
by Charles Dumas
January 4, 2008

WE SUGGEST: Bond bull intact, but short-term surge an over-reaction

SUMMARY: Ironing out monthly volatility (on the downside this time) US jobs data remain consistent with 1% GDP growth � well below the over 4% average in Q2-Q3.

The market�s obsession with the backward-looking jobs data continues to cause overreaction to the headline figure. Last month it was on the high side � bonds went down, a good buying opportunity. This month it is on the low side � bonds went up: not necessarily a selling opportunity, except for short-term traders, because the US �landing� is hardening and the bulls have the better of the argument for the next few months.

In previous months, our Daily Notes on these numbers have pointed out that the 0.7-0.9% recent rates of gain � measured as the latest three months versus the previous three, at an annual rate � are consistent with about 1% GDP growth. So these numbers are weak by comparison with actual GDP growth approaching 4% in Q2 and 5% in Q3. With December car sales modestly up and November�s business construction still mysteriously booming, a recession quarter in Q4 looks unlikely. The bears will have to await 2008 data for their next helping on honey.

© 2008 Charles Dumas
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Charles Dumas
Director of the World Service
Lombard Street Research
United Kingdom
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