It’s a new month tomorrow, and it’s a Friday, which means it’s payrolls day. Sudeep Reddy has a good preview of what the jobs report might bring; forecasts range from a decrease of 125,000 (thank you Mish) to an increase of 125,000 (Goldman Sachs, revising up their estimate substantially in light of yesterday’s ADP figures).
The one thing that everybody seems to be able to agree on is that the payrolls series is volatile, and that it’s dangerous to extrapolate too much from one datapoint. Which of course didn’t stop the markets from doing just that last time around. If the headline number comes in low, expect talk of "problems involving birth-death model revisions that often reduce jobs growth in January". If it comes in high, expect renewed talk of inflation, especially from the likes of Willem Buiter. Either way, don’t expect the markets to move in any kind of predictable direction.
It’s probably going to be a messy day tomorrow, and frankly the best thing to do is to schedule a long lunch and rise above it. The less time you spend thinking about what the markets are thinking about what the Fed is thinking about what employers are thinking, the happier you’re going to be.