By Michael Every of Rabobank
"Boom!” No, not the massive beat in headline US payrolls on Friday (379K vs. 200K consensus). That was welcome, of course. As realists pointed out, the underlying data were weaker (weekly hours were down), and the lion’s share of new jobs were in poorly-paid sectors like food services. Then again, even when the US economy is doing well, most of the new jobs are in poorly-paid sectors that don’t support aggregate wage pressures. More than expected of what wasn’t ‘working’ previously is no game changer. Perhaps that’s why equities ended up on the day, not down, and bond yields little changed? Or perhaps a finger was on the scales, as some muttered? Either way, that was the market close.
More concretely, “Boom!” was the noise heard in key Saudi oil facilities as Houthi forces (no longer terrorists in US eyes) hit critical targets with a combination of drone and missile attacks. Despite neither life nor property being lost, and this not being the first time Saudi vulnerability to supply disruption from Yemen (slash Iran) has been displayed, it was enough to push oil up from USD65 to 70 a barrel. US olive branches are so far producing more ‘duck!’ than dove. That’s very much the zeitgeist: clever-but-conventional think-tank thinking failing to produce the right kind of boom.
Relatedly, financial media re crowing about Chinese exports, which soared by 60.6% y/y in USD. Yes, that’s incredible: but it’s distorted by the base effects from 2020 - something we are going to have to look through a lot; it’s still Covid related on the back of medical supplies and work-from-home gear, which underlines the global economy is stuck in a virus...