Given we still do not have official data, we have to rely on other sources. We have gotten a few this week that are painting confusing pictures. Let’s look at them all.
ISM Manufacturing employment improved but remained below 50.
Same with ISM Services employment, although the rest of the index was very strong.
ADP bounces back to 42k. But there is major nuance here, and it is baffling. I noted this last month, but ADP has applied the QCEW benchmarking adjustment from NFP to ADP. The issue is the QCEQ applies to March 24-25 period, and not for the period after. This is a major statistical no-no because the birth death and immigration assumptions are clearly going to be different. The QCEW adjustment subtracted 99k from the two most recent months which would pain a very different picture!
On the negative side, Challenger job cuts surged to highs seen in February and March. The cuts were in tech and trade/warehousing.
EDIT: Turns out Challenger hiring plans also surged this month. This was clearly missed by the market. Here is how the two series look.
Revelio came in at -9k. It was 60k last month. Breakdown by sector shows -22k was government, -8.5k was retail trade and manufacturing/wholesale trade another 8k.
Meanwhile, my best trackers do not corroborate the Challenger layoffs or Revelio weak print. WARN notices fell to basically 0 in October.
My state by state NSA claims tracker fell to 179k this week. That is extremely low.
Nothing stands out in any of the biggest state moves.
The best tracker of all is tax receipts and it has rebounded. As I showed a couple weeks ago, this is typically negative during shutdowns. My best estimate of the impact of the shutdown is that it is 1.2BN/per day in lost income, so it should be showing up here. This could mean that there is actually an acceleration that we are not seeing because the shutdown lost income is actually keeping the below too low.
So we have a very mixed picture. The best real time trackers are Tax Receipts, Claims and WARN notices. Neither are showing us much to be negative about. Challenger and Revelio do paint a negative picture. ADP team has no clue what it’s doing and the picture there is likely better than what they showed due to a major statistical error. Meanwhile, ISM does not show much improvement for employment as of now, but forward looking indicators like headline and new orders do.
I lean on the positive side due to my real time trackers, but we are operating in a fog until the shutdown ends. They need to end it now given what we are hearing about travel disruptions ahead of thanksgiving. I do think it will end in the next week or so.
On the markets front, once the shutdown ends, we get 150-200BN liquidity injection via the TGA being drawn down. That should lift markets.
