|
Page One: Another Disappointing Employment Report
With yesterday's large advance, the S&P 500 is up 2.9% for the week and is down just 2.9% from its closing high on Oct. 19.
The correction chatter can still be heard, yet the market has again shown a propensity to buy on weakness. That bias has been fueled in part by a presumption that economic numbers should look comparatively better in coming months and reinforce the recovery trade.
Not surprisingly, the futures market was subdued ahead of the release of the October employment report at 08:30 ET as traders adopted a wait-and-see stance on the other side of Thursday's rally that saw the S&P 500 gain 1.9%.
Their reservations had as much to do with simply waiting to see the report itself as they did with questioning whether yesterday's rally was overdone.
From our vantage point, the employment report didn't do much to substantiate the scope of yesterday's rally. The overall takeaway from the report is that it was another disappointing report.
Nonfarm payrolls declined 190,000 (consensus -175,000), the unemployment rate jumped to 10.2% (consensus 9.9%), the average workweek remained unchanged at 33.0 hours (consensus 33.1), and average hourly earnings increased 0.3% (consensus 0.1%).
The payroll number is in line with the 3-month average and the prior two months were revised to show a net improvement of 91,000 positions (not addition, but fewer job losses) from the original reports.
In October, job losses were seen in all major categories, with the exception of education and health services (+45,000) and professional and business service (+18,000). Government was flat.
The manufacturing workweek improved 0.1 to 40.0 hours and factory overtime jumped 0.2 to 3.2 hours, but that is a corollary to yesterday's strong productivity report where it was apparent companies are aiming to boost profits by doing more with less.
Still, the lack of a pickup in the average workweek is another reminder that a strong pickup in hiring activity shouldn't be expected anytime soon.
Any politician should be nervous about that assumption. Moreover, the 10.2% unemployment rate -- the highest since April 1983 -- is going to create added concern for the general populace as it gets broadcast across the news and in local newspapers.
The striking feature of that high rate is that it isn't a function of discouraged workers coming back to the workforce, feeling as if job prospects were better. As it so happens, the civilian labor actually declined by 31,000 in October to 153.975 million.
The labor market is very weak. For individuals counted officially as being unemployed, 35.6% have been without a job for 27 weeks or longer. Additionally, 17.5% of the civilian labor force plus marginally attached workers is either unemployed or underemployed.
The rate of nonfarm payroll declines may be abating, but we fear the seeds of a jobless recovery have been firmly planted.
The S&P futures are about 8 points below fair value and are signaling a decline of about 0.7% for the S&P 500 when trading begins.
Feeds!