One data point does not make a recession, today's payroll data were pretty poor. In addition to the headline reading of -4, the first negative month since August 2003, prior months were revised down. As the chart below illustrates, downward revisions have been the exception recently. And experience suggests that one generally only sees downward revisions in, surprisingly enough, a downturn.
So while Macro Man is not prepared to jettison his "no recession" view on the basis of one datapoint, particularly one as volatile as the NFP report, it does raise a warning flag.
More signficantly, it is likely to spur others into action. What should we expect? At first blush, Macro Man would look for the following:
* Weak equities: a liquidity salve is only effective if stocks are cheap and people do not expect a recession. We'll need lower prices and the passage of time before that occurs
* A weak dollar. The DXY is breaking critical levels, which should spur accounts that have remained on the sideline to give George Washington a whack. Macro Man buys €30 million EUR/USD at 1.3775.
* Underperforming EM. Growth scares are not good for emerging markets, particularly those with C/A deficits and/or a heavy reliance on the US. Mexico looks vulnerable.