When the Bureau of Labor Statistics reports monthly non-farm payroll data, it will restate the previous two months. Today, the government may revise the figure down by 600,000 and up to one million for the year.
Economists at Goldman Sachs (GS) and Wells Fargo (WFC) both expect a downward preliminary benchmark revision. Goldman worries that the restatement is as big as one million. This massive revision, not seen in 15 years, would indicate that the labor market cooled earlier than thought.
Bond investors already positioned their debt holdings to brace for interest rate cuts. The 7-10 year Treasury Bond (IEF) is up by 4.97% in the last quarter. The 20+ Year (TLT) is up by 8.29%.
The revision has ramifications for Fed Chair Jerome Powell’s speech this Friday. At the Jackson Hole Symposium, Powell may hint about when rates will fall and by how much.
Rates will have minimal importance to the business cycle next. As consumers tighten their spending levels, demand for loans will fall. Be cautious investing in consumer goods stocks like Home Depot (HD) and Lowe’s (LOW).
The Fed depends on its rate policy to lower inflation. However, excessive government spending, tax credits for corporations, and higher government job hiring are inflationary. It will weaken the effectiveness of monetary policy.
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