Today's Coffee - Employment Data On Deck
(Stocks in article: Nasdaq: NTRI, NYSE: BSC, NYSE: STZ, NYSE: MAR, NYSE: CVS, Nasdaq: MTRX, Nasdaq: ISCA, Nasdaq: BEAS, Nasdaq: GOOG, NYSE: NWS, NYSE: GM, NYSE: F, NYSE: MER, NYSE: MS, NYSE: CS, NYSE: WMT, NYSE: TGT)
"Today's Coffee" has been engineered to provide value-added analysis and opinion concerning the market-moving topics of the day.
As the market gears up for Friday's Employment Situation Report from the Labor Department, a slew of other employment data is serving to confuse traders. Yesterday, the Challenger, Gray & Christmas report showed announced job cuts reached 71,739 in September, compared to 79,459 in August and 42,897 in July. While September posted a hot figure on the surface, it is noteworthy that 37% of September's job cuts occurred in housing related operations, including within construction, mortgage lending and real estate businesses. This implies that it is not general economic weakness that is affecting employment, at least not yet. However, unemployed people tend to spend less...
Also reported Thursday, the ADP National Employment Report indicated growth in employment of 58,000 jobs from August to September, while the July to August figure was revised lower by 11,000, to 27,000. The measure was clearly weighed down by weak trends in housing and financial services. Construction posted its twelfth decline in thirteen months, according to the report, dropping 20,000 jobs in the period. A total of 157,000 jobs have been shed by the industry over the last twelve months. The manufacturing sector was also weak, while services actually added 97,000 jobs and small businesses also did better than large operations.
The question everybody wants answered is, so what does this mean for Friday's Labor Department Report, which is given great weight by the market and Federal Reserve alike. Given the change in the month-to-month rate of growth offered by the ADP report, the trend seems to imply we can expect a better result Friday than the 4,000 jobs lost in August, as reported by the government. That's not saying much though is it... We suspect last month's figure could be revised higher, just because of the dramatic surprise it offered economists and degree of change it represented. What's most important is that even if the figure is higher than 100,000, it is not the end all save all piece of information to indicate recession is not imminent. Even a layman can see an ominous trend in the charts provided within ADP's press release. In contrast, we also do not expect a poor result guarantees a Fed rate cut in October, which would back up its 50 basis point reduction of September. We would even go as far to say that a Fed cut this month is unlikely, given the dollar weakness that ensued from the last reduction.
Today, weekly initial unemployment claims was reported hotter than forecast by Bloomberg's consensus of economists. The list of newly unemployed measured 317,000, exceeding the four-week average of 312,750. The figure is still not too threatening, but we anticipate trends in consumer spending will drive cutbacks in retail employment. If not for the impending holiday shopping season, this may have already begun. There are enough signs to worry, with Wal-Mart (NYSE: WMT) having reduced its guidance in August and Target (NYSE: TGT) having chimed in last month. If spending gets thrifty into the holidays, a shakeout should occur and a saturated retail industry could be exposed. That would bring the layoffs we're looking for, and the recession as well.
In other important news today, the European Central Bank and Bank of England both cut the U.S. dollar a break and kept rates steady. The ECB chief, Jean-Claude Trichet followed the news with a statement that more data would be necessary to decide if any action should be taken. He did not back off past hawkish statements, indicating he's still vigilant regarding inflation, but he did drop a portion of previous statements that indicated a view that current rate levels were accommodating. This helped calm the dollar dive, because the last thing the greenback needs is a restrictive ECB and expansionary Fed.
Supporting the employment data, which indicated financial services firms are losing weight faster than the contestants on "The Biggest Loser," a series of news hit the wires regarding Wall Street cut backs. Yesterday, Credit Suisse (NYSE: CS) announced another 170 investment bankers' necks would meet the knife, following last week's news that 150 employees in its residential mortgage-backed securities operations would be let go. Not to be left out, Morgan Stanley (NYSE: MS) followed suit, with its announcement that 600 folks would hit the road from its residential mortgage business. Then today, Merrill Lynch (NYSE: MER) had to answer to rumors that it too was considering cutbacks. Merrill's answer was that they would not rule it out.
Finally the August Factory Order Report showed a 3.3% decline, short of expectations. While the manufacturing sector may already be in recession, despite increasing overseas demand for U.S. product, the UAW's agreement with General Motors (NYSE: GM) and pending deals with Ford (NYSE: F) and Chrysler seem to go a long way in helping the healing process.
"Today's Coffee" has been engineered to provide value-added analysis and opinion concerning the market-moving topics of the day.
As the market gears up for Friday's Employment Situation Report from the Labor Department, a slew of other employment data is serving to confuse traders. Yesterday, the Challenger, Gray & Christmas report showed announced job cuts reached 71,739 in September, compared to 79,459 in August and 42,897 in July. While September posted a hot figure on the surface, it is noteworthy that 37% of September's job cuts occurred in housing related operations, including within construction, mortgage lending and real estate businesses. This implies that it is not general economic weakness that is affecting employment, at least not yet. However, unemployed people tend to spend less...
Also reported Thursday, the ADP National Employment Report indicated growth in employment of 58,000 jobs from August to September, while the July to August figure was revised lower by 11,000, to 27,000. The measure was clearly weighed down by weak trends in housing and financial services. Construction posted its twelfth decline in thirteen months, according to the report, dropping 20,000 jobs in the period. A total of 157,000 jobs have been shed by the industry over the last twelve months. The manufacturing sector was also weak, while services actually added 97,000 jobs and small businesses also did better than large operations.
The question everybody wants answered is, so what does this mean for Friday's Labor Department Report, which is given great weight by the market and Federal Reserve alike. Given the change in the month-to-month rate of growth offered by the ADP report, the trend seems to imply we can expect a better result Friday than the 4,000 jobs lost in August, as reported by the government. That's not saying much though is it... We suspect last month's figure could be revised higher, just because of the dramatic surprise it offered economists and degree of change it represented. What's most important is that even if the figure is higher than 100,000, it is not the end all save all piece of information to indicate recession is not imminent. Even a layman can see an ominous trend in the charts provided within ADP's press release. In contrast, we also do not expect a poor result guarantees a Fed rate cut in October, which would back up its 50 basis point reduction of September. We would even go as far to say that a Fed cut this month is unlikely, given the dollar weakness that ensued from the last reduction.
Today, weekly initial unemployment claims was reported hotter than forecast by Bloomberg's consensus of economists. The list of newly unemployed measured 317,000, exceeding the four-week average of 312,750. The figure is still not too threatening, but we anticipate trends in consumer spending will drive cutbacks in retail employment. If not for the impending holiday shopping season, this may have already begun. There are enough signs to worry, with Wal-Mart (NYSE: WMT) having reduced its guidance in August and Target (NYSE: TGT) having chimed in last month. If spending gets thrifty into the holidays, a shakeout should occur and a saturated retail industry could be exposed. That would bring the layoffs we're looking for, and the recession as well.
In other important news today, the European Central Bank and Bank of England both cut the U.S. dollar a break and kept rates steady. The ECB chief, Jean-Claude Trichet followed the news with a statement that more data would be necessary to decide if any action should be taken. He did not back off past hawkish statements, indicating he's still vigilant regarding inflation, but he did drop a portion of previous statements that indicated a view that current rate levels were accommodating. This helped calm the dollar dive, because the last thing the greenback needs is a restrictive ECB and expansionary Fed.
Supporting the employment data, which indicated financial services firms are losing weight faster than the contestants on "The Biggest Loser," a series of news hit the wires regarding Wall Street cut backs. Yesterday, Credit Suisse (NYSE: CS) announced another 170 investment bankers' necks would meet the knife, following last week's news that 150 employees in its residential mortgage-backed securities operations would be let go. Not to be left out, Morgan Stanley (NYSE: MS) followed suit, with its announcement that 600 folks would hit the road from its residential mortgage business. Then today, Merrill Lynch (NYSE: MER) had to answer to rumors that it too was considering cutbacks. Merrill's answer was that they would not rule it out.
Finally the August Factory Order Report showed a 3.3% decline, short of expectations. While the manufacturing sector may already be in recession, despite increasing overseas demand for U.S. product, the UAW's agreement with General Motors (NYSE: GM) and pending deals with Ford (NYSE: F) and Chrysler seem to go a long way in helping the healing process.
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posted by The Greek | 3:47 PM
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