Cold Weather, Calculated Estimates, and Chris Christie

Why nonfarm payrolls shouldn't move markets that much, and other random thoughts

Jan 9, 2015 at 9:10 AM
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It's Friday … nonfarm payrolls Friday! I don't have much "value add" to say about jobs, especially since the number came out before you read this. I'll gladly tweet my "guess" after 8:30 A.M. though!

Anyways, here are some random thoughts in no particular order:

  1. When I woke up yesterday, it was 8 degrees out. By 9:00 A.M., it had blasted all the way up to 12 degrees. So did the temps rise 50%? No, of course they didn't. It's a silly concept to compare temps that way, but if you're inclined to do it, start at absolute zero. By that scale, the temps rose from 467.67 degrees Kelvin to 471.67 -- or 0.85%. That sounds about right. I bring this up because you hear this same sort of sound bite about the jobs number. If the estimate is 240,000 jobs added, and the number comes in at 180,000, it didn't miss by 25%. The economy employs 140 million-ish -- ergo, the estimate missed by 0.04%.

  2. The number is a calculated estimate anyways, with all sorts of seasonality and assumptions that get revised over time. Why this becomes some sort of gospel is beyond me, though I'm not sure the market itself moves on it as much as we think. Setting aside the pre-market noise around the announcement, I would guess Jobs Friday during trading hours is no more volatile than Garden-Variety Friday. I will attempt to back up that anecdotal observation with real numbers at some juncture.

  3. We have seen unprecedented early year volatility so far in 2015. CBOE Volatility Index (VIX) peaked a bit below the mid-December peak (22s vs. 25s). The volatility of volatility also didn't reach mid-December highs (125 vs. 141). That's modestly odd, considering the calendar bias towards January.

  4. Incidentally, VIX is down 11.5% in 2015. More fun with arbitrary endpoints!

  5. Keep on a rockin' me baby! 2015 clearly will become the Year of Steve Miller -- or at least the first Year of Steve Miller since whenever "Abracadabra" came out (I'm thinking 1982). First, he gets his song in a Taco Bell ad. Then he gets a pick-six in the Sugar Bowl. If I'm his agent, I'm pitching "Jet Airliner" to United, "Fly Like an Eagle" to American Eagle Outfitters and "The Joker" to the Colorado Tourist Bureau -- or maybe some 8th-generation Batman reboot.

  6. Go Packers! And leave our orange sweater-wearing "mojo" machine in Lambeau. He may rethink his Cowboy fandom after catching a glimpse of one of these. On the plus side, he's united all Giants and Eagles fans here in New Jersey behind a common cause!

  7. I show the Pack worth -6, so the line is pretty fair. Madden thinks the game is a draw. Both assume Aaron Rodgers will play … but the Pack minus Rodgers is an underdog against half the league. Way back when, teams off the bye in this round cruised, but that hasn't been the case in a decade. I REALLY hope I'm wrong, but this sure feels like the most likely spot for an upset.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.




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