It's very important. I'll be watching the unemployment rate and wages to see the state of the labor market heading into the shock. There's information value in whether the underlying economic momentum is resilient.

You have to take each payroll report in some sort of average, but there's information value.

I think there's some pick-up in slack, but I would still say there isn't a lot. Consumer spending is okay, but confidence around finding a job is low. That tells me there's not a lot of slack.

We're still watching initial claims, layoffs are still low. That tells you slack is not picking up a lot.

As we think about the central bank reaction function, that slack question will be key. Watch the unemployment rate and wages. Our base case is we stay in a soft landing, but that might get challenged if the energy shock lasts longer.

The economy is not as weak as 2008, but it's not as strong as 2022.

People may not be positioned for sticky inflation. The technicals imply people are de-risking in credit, equities, and duration. They might want to be long but aren't long enough.

This week gives us confidence that technicals have improved. A lot of the rate move was de-leveraging.

There's a disconnect with the risk complex saying fundamentals are strong, which is why payrolls are important and this is short-lived. We should also think about the end state. If the Strait of Hormuz only opens with Iran controlling it, then the end state of oil is a $90 oil price. The market could wake up to this being a growth shock.

On credit, spreads are still very tight. We've been de-risking. If we head into a slowdown, let alone a recession, if oil prices stay that high and labor market slack picks up, I think credit spreads might be vulnerable. High-yield spreads could widen more.

We're seeing yield-based buying, which is an assumption that interest rates and treasuries have risen, spreads are tight, so I'm getting 5.5-6% all-in yield.