July Employment - Not a Catalyst

We’ve beaten the drum repeatedly on the TREND slope of improvement in the labor market and the associated investing implication this week (links to those notes below) so we’ll keep it to the data here.  The short of today’s Employment release is that it's largely un-impactful to our positive intermediate term growth outlook for the domestic economy.   


We went to net neutral in our Real Time Alerts into yesterday afternoon’s advance, net short this morning, and would be selectively looking to add back long exposure on weakness, provided the $USD holds support.   


Given the general strength of the macro data thus far in July (Claims, ISM, PMI), we expect equity weakness to be met with a bid as we pullback towards immediate term support at $1690 on the SPX.


As summary review of this morning's Employment data:


NFP: Net Non-Farm Payrolls gains declined sequentially to 162K, but held flat on a YoY growth basis at +1.7% and accelerated +30bps on a 2Y basis.  

NFP Revision:  The net two month revision was -26K with May revised from +195K to +176K and June revised from +195K to +188K.  

Household Survey:  Net employment gains as measured by the Household Survey improved to +227K from +160K in June.   

Employment by Age:  All Age demographics saw accelerating employment growth in July.

Unemployment Rate:  The Unemployment Rate dropped to 7.4% from 7.6% as the total labor force registered a net decline alongside an increase of +263K in Total Unemployed and an increase of +227K in Total Employed. 

Labor Force Participation:  A positive change in the working age population alongside a net decline in the labor force pushed the Labor Force Participation Rate down to 63.40% from 63.46%.

State & Local Gov’t Employment:  State & Local Government Employment (14% of total workforce) accelerated from 0.03% to 0.10%, marking the 3rd consecutive month of positive employment growth with May marking the first month of positive growth since June of 2009.

Part-time/Temp Employment:  Temp employment increases by 8K MoM with YoY growth decelerating 40bps sequentially.  Part-time employment increased 174K MoM (77% of the total 227K gain as estimated by the household survey)  with YoY Growth accelerating 50bps sequentially.  

Industry Employment:  Retail, Business Services and Leisure the leaders this month at +47K, +36K, +23K, respectively.  Construction losing 6K on the month. 

Ave Weekly Hours for Private Employees:  Hours declined to 34.4 from 34.5 MoM and were flat vs. year ago levels. 



Please see this week’s notes for more detailed analysis and strategy discussion: 



Enjoy the Weekend.  


July Employment - Not a Catalyst - Employment Summary Table


July Employment - Not a Catalyst - Claims 080113


July Employment - Not a Catalyst - CPS vs CES


July Employment - Not a Catalyst - CES vs CPS MoM


July Employment - Not a Catalyst - Unemployment Rate


July Employment - Not a Catalyst - Employment by Age


Christian B. Drake

Senior Analyst 


Morning Reads on Our Radar Screen

Takeaway: Here's a glimpse at what some of our analysts are reading this morning...

Morning Reads on Our Radar Screen  - Screen Shot 2013 08 02 at 7.36.01 AM




Putin Shows Global Mojo to Russians as U.S. Fumes Over Snowden (via Bloomberg)





Southwestern Energy swings to profit (via MarketWatch)


Mr. Sandman – Getting Proppant to the Wellhead (via RBN Energy)





Bio Hackers (via East Bay Express)





Tourre’s Junior Staff Defense Seen Leading to Trial Loss (via Bloomberg)


Glencore Leading in Metals Storage as Goldman, JPMorgan Cut (via Bloomberg)


[PODCAST] Expectations, Unemployment, and Heartache

Expectation is the root of all heartache, and Hedgeye CEO Keith McCullough talks through expectations and unemployment by the numbers on today's morning call.



Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

Awaiting The Employment Number

Client Talking Points


Japanese equities have loved a weak Yen in as much as the SPX has loved #StrongDollar and this week was rock solid for the USD/YEN cross as US Economic data for July (jobless claims 326k and ISM 55.4 yesterday) smoked the US #GrowthSlowing bears out of their holes - again.  Yesterday was a strong dollar, strong stocks day in the U.S. and, on a TREND duration, the Dollar-SP500 correlation remains strong at +0.76.   The Nikkei matched the U.S.’s performance and raised it one - closing +3.3% on the session and now up +40.5% year-to-date.   


What matters in Macro happens on the margin and, on the margin, the European data has been better.  Both the DAX and FTSE are back in Bullish Formations (Bullish across TRADE, TREND, & TAIL durations) but signaling immediate-term TRADE overbought here this morning.  With domestic, pro-growth leverage (XLF, XLY, etc) overbought yesterday also, there is a growing list of (very short-term) mean reversion factors that could take US and European stocks down if this jobs print is either too hot or too cold.


What is too hot of an employment number? A print north of 200k in payrolls could easily push the yield on 10Y treasuries to the 2.8-2.9% range and, in the process, freak out consensus which isn’t positioned for a redo of June. What number would be too cold is easier  – a jobs miss this morning would be the 1st in 6 months, and the bears need a bone here.  Oh yeah….and #RatesRising is crushing Gold again too.  We covered our gold short yesterday and would not be buyers of weakness.   

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.


Gaming, Leisure & Lodging sector head Todd Jordan says Melco International Entertainment stands to benefit from a major new European casino rollout.  An MPEL controlling entity, Melco International Development, is eyeing participation in a US$1 billion gaming project in Barcelona.  The new project, to be called “BCN World,” will start with a single resort with 1,100 hotel beds, a casino, and a theater.  Longer term, the objective is for BCN World to have six resorts.  The first property is scheduled to open for business in 2016. 


Health Care sector head Tom Tobin has identified a number of tailwinds in the near and longer term that act as tailwinds to the hospital industry, and HCA in particular. This includes: Utilization, Maternity Trends as well as Pent-Up Demand and Acuity. The demographic shift towards more health care – driven by a gradually improving economy, improving employment trends, and accelerating new household formation and births – is a meaningful Macro factor and likely to lead to improving revenue and volume trends moving forward.  Near-term market mayhem should not hamper this  trend, even if it means slightly higher borrowing costs for hospitals down the road. 

Three for the Road


Securities have multi-standard deviation events though, so you need a real research team to have your back on that




"The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics."

-Thomas Sowell


Today is the 16th consecutive day where all 9 sectors in Hedgeye's S&P Sector model are bullish on both TRADE and TREND durations.






Chinese tycoon Tony Fung has proposed to build a A$4.2 billion ($3.75 billion) casino and resort project in Australia's Cairns city, close to the world-heritage Great Barrier Reef.  The Queensland state government said on Friday that Fung's casino proposal was declared a "coordinated project" on Aug. 1, the first step in the government's approval process.


Fung, a billionaire son of one of the founders of Hong Kong conglomerate Sun Hung Kai & Co. Ltd, is planning to build an integrated resort 13 kilometres north of Cairns that will include an "international class" casino with 750 tables and 1,500 machines, one of the world's largest aquariums and a 25,000-seat sports stadium.  Fung's planned Aquis resort "gives Queensland an opportunity to fend off its southern and regional competitors for the increasingly important Chinese tourism market," Fung said in an open letter published on the project website.


The Aquis Resort at the Great Barrier Reef project has a targeted opening of 2018 and could create 26,700 jobs when fully operational, according to information on Aquis' website.  The resort is also set to include 13,500 square metres of high-end retail and two 2,500-seat theatres.




August 2, 2013

August 2, 2013 - dtr



August 2, 2013 - 10yr

August 2, 2013 - spx

August 2, 2013 - nik

August 2, 2013 - dax

August 2, 2013 - dxy

August 2, 2013 - euro

August 2, 2013 - oil


August 2, 2013 - VIX

August 2, 2013 - yen

August 2, 2013 - natgas
August 2, 2013 - gold

August 2, 2013 - copper


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.