In the chart below we take a look at the relationship between lumber prices and private nonfarm payrolls. Clearly they tend to move together on a monthly basis. One of the transmission mechanisms of monetary policy is the impact of interest rate changes on the construction sector, which has historically been a leader of past economic recoveries.
This is clearly not the case in the current balance sheet growth recession, so we are not as confident in the lumber price/nonfarm payroll relationship. Nevertheless, lumber futures have been under heavy pressure since the end of March, down over 30 percent, no doubt, partially the result of the double dip in housing prices. It will interesting to see how, or if, the correction in lumber shows up in the private nonfarm payroll number tomorrow.
(click here if charts are not observable)
Global Macro Monitor 
A smoothed YOY% change in lumber correlates pretty well with ISM too.
Thanks, John. We need to do more work on this, looking at individual job categories and more real time indicators. We did a piece on the Russell 2000 and private sector jobs late last year. Pretty good tracking…
https://macromon.wordpress.com/2011/01/05/did-the-russell-2000-predict-the-better-than-expect-adp/
Interesting set-up for tomorrow. All the traders we talk expect a pop if number > 100K which that they want to spank. We’re a little chort in number is bad and will add. Good luck!
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