Payrolls…If your feeling scared don’t read this
What do you do if payrolls is much weaker. I am concerned for three reasons.
1stly, we look at the challenger data, which has a strong relationship with payrolls. It is most likely exaggerating (payrolls will not fall 500K) but does indicate downside risk.
2ndly, the jobs hard to get data is most likely also an exaggeration: unemployment will not rise to 10.3% but the risks are for a worse not better number.
3rdly, the ISM service Emp series is well below the 50 level at 48.7 (51.6 last). When data lurches like this across different series I’m concerned.
Sure the ADP was better, claims are good and the Manufacturing ISM Emp data looks good.
This raises the debate about how do you trade a really bad payroll number?
You may say sell equities but , by the afternoon, rumours of QE will do the rounds. OK sell risk but then you land up with dollars! One idea would be to sell AUD-JPY.
HSBC Global Research