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Understanding the Surprise in Jobs Data and Reassurance That You’re Hedged

By Derek Moore

Today's data showed rising wages and slowing pace of hiring which is not a great recipe.

Just yesterday I was in a local store where the owner was saying he can't find workers because of the government enhanced benefits. If he raises wages, he must raise prices. But if he does this, he might lose customers who don't want or can't pay the higher prices.

Seeing the jobs data, I thought of this store owner and how this one little example illustrated the fear a lot of people have about "stagflation"

So how can you take this data and explain what it means but also how having hedged portfolios lets them take a deep breath and not worry.

Slowing Hiring Rate in August 235k Actual vs 720k Estimate   

  • This was a disappointment that shows the labor participation rate is still trailing pre-2020 levels. 
  • It does give the Fed ammunition to NOT raise rates any time soon though
  • Enhanced unemployment benefits are ending which could help hiring 
  • This may raise the pace of hiring as employers going forward don't have to compete with the government and reduce wage pressure

Raising Wages

  • Wage growth is problematic for the Fed in their inflation is transitory position
  • Could put pressure on prices raising prices
  • We are NOT there yet, but Stagflation (rising prices and falling GDP growth) did come to mind when thinking about the job’s numbers

 But If You’re Hedged Don't Worry?

  • If you have already hedged, creating a floor in the portfolio it changes things
  • Be interested but you don't have to be fearful about every bit of data
  • If what you fear comes true because of economic data, you have protection

To Understand Economic Data Think About a Local Example

  • Like my story in the opening try to equate things to analogies an examples
  • Economics can seem complicated but, in the end, even experts are trying to parse the data and make a prediction (but not certainty) of what it means
  • Uncomplicate, and tell a relatable illustrative story that gives your clients both sides
  • Take a deep breath because if you hedged, this is for entertainment purposes only not to make portfolio defining decisions on getting in and out of markets

Jay Pestrichelli Was Quoted in the Wall Street Journal, Reuters, & MarketWatch

  • Jay, as an industry source, lent his insights to both these and other news outlets today
  • Media and the public are all trying to figure this out
  • We follow and digest all of this in our regular internal meetings

So, there you have it. You can help your clients understand all of this and remind them of their goals and how they already are reducing risk if they are using things like Buy and Hedge. 

You can check out Jay's comments directly in the Wall Street Journal, Reuters, and MarketWatch.