The release of the US benchmark revisions to employment for the year ending in March were something of a mess and the market clearly doesn't know what to do with it.
There was an odd spike in USD/JPY when the numbers should have been released, followed by all kinds of rumours before the -818K number was finally released.
Then stocks ripped higher but are now below pre-data levels and bonds are bid but not as strong as before.
Here is the positive view on 818K job losses:
1) It gives the Fed cover to cut rates
If the case for a September cut and 3 cuts on the dot plot wasn't strong, it's stronger now.
2) A lower base
So going into the year through March, there were 818K fewer jobs. Maybe now that clears the way for the economy to add 818K jobs without creating more inflation than we already have.
3) Illegal immigration skews everything
This isn't positive but we don't know what we don't know. Could there have been 818K illegal immigrants hired in a year? Maybe. No one fully knows what's happening at the border, how many people are crossing and how many are working. At the end of the day though, the Fed has to use the numbers it's given and can't make policy based on illegal immigration vibes. It certainly makes their job tougher but you have to play the hand you're dealt and -818K is objectively bad.
4) The economy did fine with 818K fewer jobs
Okay, so the jobs market wasn't as strong as thought. So what? GDP growth was good and corporate profits were great. What's the problem with a few less employees? Unemployment is still historically low and this keeps a lid on wages.
5) Inflation is dead anyway
US inflation is trending lower and it's about to get even better. WTI crude oil is trading at $73.55 right now and that compares to a Sept-Oct 2023 range of $85-95. That's going to create some very rosy y/y comps that will pull CPI to 2%, or very close. That also buys time for housing disinflation (or outright deflation) to work its way into the numbers, as those lag badly.
You square it all up and it looks like the coast is clear for the Fed to cut at every meeting until rates are at 3%. And if the outlook deteriorates, there is the option to go faster -- a true Fed put.
The takeaway:
All this points to what the market has been saying for the past two weeks: Weaker US dollar, lower yields, stronger stock markets.
