Calling Bull on an Allegedly Bullish Payroll Report
The payroll revisions show that the cyclically-exposed sectors of the economy shrank last year — which has never happened outside of a recession.
Key Takeaways
Retail Sales Are Struggling: Now we can see that even with the high-rollers spending their equity market gains, the low- and now the middle-class household has pulled back enough that there has been zero growth in real retail sales since June. Even adding on inflation, the nominal figure since September is a mere +1.4% annualized pace. That ain’t no boom, nor is it resilience.
Cyclically-Sensitive Employment Fell Last Month: The spurious employment data for January didn’t move me, and the fact that bond yields barely rose and the equity market could not sustain its earlier gains suggests that investors caught on to the fact that employment, net of the Birth-Death model and beyond health care and education, contracted last month.
Delinquency Rates Show Consumer Strain: The New York Fed’s quarterly report on household debt was released and counters the consensus view that personal balance sheets are squeaky clean and in terrific shape. That is only true for the high-end income cohort. The strains are evident in the late-payment rates, which remain on an upward trajectory. For the overall household sector, the 90-day delinquency rate climbed to 3.12% from 2.98% to stand at the highest level since COVID-19 was raging out of control in 2020.
