[Past Articles Free Public] Employment Statistics Significantly Higher than Expected

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The article in question is a reprint of past articles.

The employment statistics released over the weekend showed a sharp upside.
The numbers were shocking.
As I have written before, while tens of thousands are honestly within the margin of error, a deviation on the order of tens of thousands becomes a surprise.
A deviation of just under 300,000 versus expectations counts as a surprise, and that’s the result we got.
Looking at the details, employment has progressed, so the unemployment rate naturally declined.
Average hourly earnings are in line with consensus (though in reality they appear to be slowing somewhat).

Regular employment fell by 10,000.
Non-regular employment surged, contributing to the headline rise in employment statistics.
As I have often mentioned, a situation where regular employment decreases while non-regular employment increases is not healthy for the employment landscape.

As long as selective hiring continues, part-time workers tend to increase and employment remains tight.
Since jobs don’t suddenly disappear, they increase non-regular workers who can be let go at any time to adapt to on-site needs.
If the economy truly slows, non-regular workers will be cut and unemployment will rise properly.
That’s the kind of scene we’re describing.

— ELE (@eleconomics)February 3, 2023

It’s part of yesterday’s thread, but this image will be easy to grasp if you keep it in mind.
A sharp upside in numbers is likely due to the rebound from the slowdown in November and December.I have long warned that economic activity in November and December had stalled and should be viewed with caution.

The January data being higher than expected is a response to that scenario, one could say.
The fact that January data beat expectations is the answer to that scenario, one could say.

ISM Non-Manufacturing PMI also jumped from 49.6 to 55.2 on the headline.
Likewise, this implies the economy that had slowed at year-end reopened in January.
Geopolitically, the United States experienced a harsh cold spell at year-end, so there is nothing particularly strange about that.
What can be inferred is that the January indicators released in February are likely to exceed the previous month.
It will be a moment where those who have spread the idea that "Inflation is over; there will be rate cuts by year-end"—without scrutinizing the details—will be struck by the numbers as primary data.

On the other hand,it would be incorrect to say this will influence the Fed’s stance, which I want to make clear.
The Fed may have been surprised by the numbers, but from examining the employment data, they should have formed the image described in the above tweets,which would indicate that monetary policy is proceeding normally.
If the situation starts to crumble, it would accelerate quickly, so there is no need to tinker now.

The digestion of employment statistics is expected to proceed relatively in the short term, and a lax mood would return.
However, as noted above, there is a possibility that February indicators will beat expectations, so we will be reminded each time new data is released.
The scenario described in January now seems likely to be realized.
Only now will it become clearer why Powell has repeatedly emphasized data dependency and why there has been a divergence between the market and our trajectory.
(This is something I have written in advance, so readers should already know this)

Looking at this week's schedule,Chair Powell's remarks are scheduled for Tuesday.
That does not mean you need to fear the content of the speech excessively.
Since average hourly earnings are slowing, there is no reason to overreact; if risk assets fall too much, it could present a buying opportunity.
Balance is important, and it is also important that the Fed is not wavering.

On the other hand, the market is likely to move bearish ahead of the briefing.
We will probably see another round of trading based on first-hand data.

Stock prices may stay high but repeatedly fall and be covered, gradually forming a so-called "so-so" top.
NASDAQ 13,000 may be the support behind it.
With three indices unlikely to align, the start of the bear trend is likely to fall on NASDAQ.
A high-growth rally led by mega-cap tech has driven January, so the decline may also begin with high-growth names.

The real turning point remains in CPI.
By February 14, the peak may have already occurred, or perhaps it has already been reached.
But this depends on the degree of ascent, so it is hard to say.
There is also the issue of CPI calculations, but even if CPI does not break, there will be option-related cuts around the SQ date, so the mid-month could be a turning point either way.

The employment statistics led to a substantial rise in the cross-yen.

As dollar buying increased, yen shorts expanded, which suggests a stop-loss burn of yen shorts.
While we expect the dollar-buying trend to continue, the yen shorts’ cover is likely to peak on Monday morning in Tokyo.

The image is like GBP/USD.
Given that activity occurred when Tokyo was not in session, there was a drop in GBP/USD due to stop-loss chasing in the Tokyo session, and similarly we expect a rise in cross-yen triggered by stop-loss chasing.
It is unlikely to last long, and real demand will also come in, so this should peak here.
After Tokyo morning ends, all cross-yen longs should be closed or reduced, and we should wait for further declines.

London market is expected to re-enter yen buying.
European currencies look set for a rebound, but in New York we may see renewed dollar-buying dominance.
The dollar-buying trend will continue for a while after a pullback.
At least until after CPI.

On the other hand, yen buying is a separate theme, so once it settles, yen buying and dollar buying may resume.
Therefore, give up the head and tail; Tokyo morning may be the peak, and that is the current sense.
There is no advantage to holding a yen-buying position, so there is no harm in taking profits or waiting.
FX should trade in a range with lower volatility as a base.

If cross-yen stop-loss is triggered, there is a high likelihood of a large yen depreciation, which would also bring the Nikkei to a climax.
We anticipate an rise targeting 28,000 yen.

This scenario centers onTokyo morning position-chasing as the core of the scenario.
If nothing moves, it simply means it’s time to take profits, so the time window for taking profits in Tokyo morning does not change.
If the probability is high, it’s worth trying to hold.

But if such movement is seen, you can ride along in Tokyo morning even for a short time.
If the content is a short-squeeze in the underlying positions, there should be no drop without retracements, making it easy to tell apart.

The shift to dollar-buying is due to the three central bank stances becoming established in the prior article.
Since the main stream is doing that, the employment statistics merely backed it.
The reason to short the dollar is fading, so continuing to target dollar buying.

Commodities weakness and dollar buying may have passed a turning point.
Currencies are also turning, and outside of the stock market, most markets have already reversed ahead of others.
It is common that investors do not realize it until the end.

※This article does not instruct or recommend trading timing.
Please make your own investment decisions.