Track Rates, Not Just Levels

Your Daily Eko

September 10, 2025 • Estimated Reading Time: 4 minutes

🧠 Insights You Won’t Forget

Today's insights are inspired by a recent episode of Odd Lots/ Steve Englander.

  1. NFP as a moving target

    Seasonality, post-COVID normalization, and volatile immigration flows make headline payrolls far less reliable for cycle reads than pre-2020.

  2. Birth-death adjustment is masking weakness

    The model imputes roughly 100K jobs per month from firm births minus deaths, but high-quality administrative data implies this contribution has “tanked,” creating an upward bias in NFP.

  3. Expect big downward revisions

    QCEW and Business Employment Dynamics, which cover the universe of unemployment insurance filers, likely show a 0.75 to 1.1 million overstatement of jobs between Q1 2024 and Q1 2025.

  4. Practical read of tomorrow’s print

    Translate NFP into a “de-biased” figure. Example: 100K headline minus a 70K bias implies ~30K true job creation, strengthening the case for a 50 bp cut.

  5. Track rates, not just levels

    In volatile regimes, prioritize unemployment rate, hiring rate, firing rate, wage growth, and especially employment-to-population ratio, which has drifted down toward 59.6 and signals softening.

  6. Near-term Fed drives FX and bonds

    Over the next 4 to 6 weeks, Fed path dominates. After that, fiscal concerns and persistent non-tariff inflation pressures can re-steepen long end yields.

  7. Tactical dollar view

    Positioning looks short dollars near term, allowing dollar softness into cuts, with a setup for dollar strength by year end as fiscal and stickier inflation reassert

  8. Europe’s structural bind

    France’s deficits, fragile politics, and consolidation constraints are pushing yields higher. In the UK, higher rates can trade like risk premia, weakening currency in EM-style fashion.

  9. Portfolio stress tests to run now

    Model a 25 vs 50 bp cut, a soft-landing but fiscally heavy backdrop, and a re-steepening in long end yields alongside improving US productivity from AI that does not fully show up in jobs.

  10. Methodology fix that matters

    Use contemporaneous signals from continuing-firm hiring to constrain birth-death assumptions, reducing the monthly NFP error that drives costly positioning swings.

Recall from last week

  1. Zig When Others Zag

    Echoing Buffett, Marks insists: when others are carefree, you must be cautious; when others are terrified, you must be bold. It’s emotionally difficult, but consistently profitable for those disciplined enough to follow it.

  2. You Can’t Raise Money in a Crisis

    Marks explains that capital must be raised before crises hit, because fear paralyzes investors. During 2008, Oaktree’s foresight in raising standby funds early allowed them to deploy billions while others froze.

💡 Eko Worth Remembering

“There just isn’t any significant jobs creation from newly formed firms.”

Steve Englander

⚡ Active Recall – Test Yourself 

Question: If next month’s NFP prints 95K while employment-to-population slips again and QCEW confirms prior overstatement, how would you adjust your rates, duration, and USD views across the next 6 weeks versus into year end, and why?

(Answer at the bottom)

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Answer:

In the short run, lean long bonds and short USD on the weak labor signal and Fed cut bias. But into year end, rotate: reduce duration, prepare for higher long yields, and position for a stronger USD as fiscal and structural pressures reassert.

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