Today has the possibility of being one of the more interesting Non Farm Payroll reports we have seen in a while. (despite our usual admonition that we do not put a lot of weight on any single NFP report).
With Futures down almost 100, and the early reads on employment this week mostly soft — ADP and new jobless claims both disappointed, counterbalanced by Payroll Tax Withholding which was way up in March. The consensus of economists is for a net gain of 190,000 workers in March after a gain of 236,000 in February.
There is plenty of angst around the globe, from softness in Asia to recession in Europe. Even the latest rescue in Japan is causing consternation.
Where things get surreal is trying to delve the reaction to a better or worse jobs numbers by the primates and algos slapping keyboards on trading desks. What does a weak number mean? What will the impact of an upside surprise be?
There are times when a soft employment report comforts portfolio managers, as it confirms the Fed’s accommodation is likely to continue, aka “Bad News is Good News for stocks.” Other times, burgeoning economic strength reduces expectations of how long the Fed will continue ZIRP/QE, aka “Good News is Bad News for stocks.”
Here’s where things get tricky: Sometimes, bad news is actually bad news. If the US economy is truly slowing, if the rest of the world is dragging the US economy down, if despite all the Fed has done markets no longer levitate on command, well than that is “Bad News is Bad News for stocks.”
Perhaps all the negativity is for naught. Europe’s recession is mild despite the horrific crisis they seem to be working their way through. Even Asia’s softness still means China is growing at 7%+. What the rest of the world needs is some strength and economic leadership from the US, in which case a strong NFP report would give us “Good News is Good News for stocks.”
Hence, our conclusion in advance of the Employment Situation is that we will get news, and it will be either Good or Bad, which will be interpreted in the context of cross currents of growth and Central Bank policy and sentiment, from which traders derive an investment thesis that Good or Bad news will be either Good or Bad for stocks. Lights will flash, bells and whistles will go off, and they will make their trades accordingly.
Of course, the NFP will get revised next month, and then again the following month, and then updated in a quarter and re-benchmarked in a year. It often ends up looking nothing like the original data release.
And that is why the Employment Situation report is the most overrated economic data point of the month.
Employment situation report released at 8:30am
UPDATE: Nonfarm payroll employment edged up in March (+88,000), and the unemployment rate was little changed at 7.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment grew in professional and business services and in health care but declined
in retail trade.