Can we Trust the latest economic data?
Now that the recent data vacuum has ended, we received a flood of important economic releases this week—most notably jobs and inflation data. The real question, however, is how much confidence we should place in these numbers.
Labor Market Update
Following last week’s higher-than-expected job openings report, nonfarm payrolls came in at just 64,000. During the most recent Federal Reserve press conference, Chair Powell noted that monthly revisions could be adjusted downward by as much as 60,000, meaning this headline number could ultimately be close to flat. October payrolls were also revised sharply lower to -105,000.
Additional signs of weakness emerged as the unemployment rate continued to rise, now sitting at 4.6%. Wage growth also disappointed, decelerating back to pre-pandemic levels.
Inflation: Too Good to Be True?
Economists and the bond market are increasingly questioning the favorable inflation data. Core CPI decelerated to 2.6%, which would mark the lowest reading since the first quarter of 2021. While that would certainly be welcome news, several components raise concerns—particularly the sharp deceleration in the shelter component.
There are also lingering questions around the strength of holiday sales in the second half of October. At this point, it feels like we need at least one more inflation report before drawing meaningful conclusions about the broader economic picture.
Market Action and Technicals
After Wednesday’s sharp market drawdown—which broke through a tight price channel and the 50-day moving average—we saw a solid rebound on Thursday. That said, it’s still unclear whether this move is sustainable, as markets remain below yesterday’s highs.
With growing skepticism surrounding the CPI report, sentiment could shift quickly. Seasonally, we’re approaching a more favorable part of the month, but whether Santa shows up for markets this year remains to be seen.
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Disclaimer
The opinions expressed in this material are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and does not guarantee future results. All indices are unmanaged and cannot be invested into directly. Economic forecasts may not develop as predicted.