Dullness, and bias

10 Jan 2025 2 min read

Daily update

  • US employment report Friday brings the regular reminder that average earnings are not wages (changing labor force structures change the average). The payrolls number is derived from a survey that has a 43% response rate, and that poor representation means significant revisions are much more likely. The market is looking for a fairly dull report overall—some moderation in job creation with a stable unemployment rate.
  • US Michigan consumer sentiment is still vulnerable to partisan bias. The recent improvement is mainly due to surging Republican sentiment. Republicans are more emotional than Democrats, pushing the overall index higher. Partisan bias does affect the inflation expectations component.
  • UK gilt yields have attracted media attention—although the rise is in line with US yield increases. The precedent of the Truss debacle may mean more attention is paid to rising yields—though that was a disorderly market, and this is not. UK interest payments remain a lower share of the economy than in many other countries, limiting the economic fallout for now.
  • US President-elect Trump’s influential adviser Musk has admitted that USD 2 trillion of government budget savings may not be achieved. After decades of excessive optimism about government efficiency, investors assume a number closer to zero, and will not be concerned by this.
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