A Short NFP Q&A

OK, let’s get this out of the way:

Consensus for today’s Payrolls are gains of 95,000, and a jobless rate of 9.1%.

By now, you know my leading indicators: Wages, Hours Worked, Temp help. Unless these improve, the actual number — from 50k to 150k — is mostly noisy, frequently revised data series that represents a net monthly change of about one tenth of one percent in a labor market of 143 million workers.

What matters more to me is the overall trend in employment data as it impacts the many aspects of the general economy. Let’s look at this issue in a Question and Answer format:

• Are jobs readily available? No.

• Is the economy creating enough jobs to reduce the unemployment rate? No.

• Are we even creating enough new jobs to keep up with population growth? No.

• Is the overall employment situation having an impact on Consumer confidence? Yes, negatively.

• Is this impacting consumer spending and retail sales? Yes, in a negative way.

• What is the likelihood the employment situation improves soon? Modest at best.

• Will the jobs report impact the thinking of the Fed? Only if its an extreme outlier.

• How about Congress? Their dysfunctionality prevents them from responding.

• What does this mean for the markets? Short of an outlier, very little.

• Isn’t the economy a key of earnings and therefore equity valuations? At times yes, but the economy is not the market’s driver these days.

• What is? Markets are being driven to the down side by European concerns and to the upside by excessive liquidity and an under-invested hedge fund community.

Thus, we continue to downgrade the significance of the monthly NFP, and stay focused on the ongoing trend, which has been disappointing to say the least. Keep watching the three internal components that are forward looking, and beware of any outliers.


Employment situation report released at 8:30am

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