Here we go again. Just by observing some anecdotal, very unscientific evidence, the 100k gain in jobs the consensus is looking for seems to be too high (I have a lot of time these days to conduct these surveys). Add in the announced job cuts and factor in that new home construction has fallen off the map, the number should be weak. Yet, who knows? Those of you who know me or have been regular readers (I got a page hit from Qatar yesterday, goin' global) know my feelings on the employment numbers. In a nutshell, in and of themselves, employment numbers are next to nonsense. We are relying on the 50 state bureaucracies, plus assorted commonwealths, territories, and districts, to provide timely and accurate information to be complied by another bureaucracy. Any number where the revision gets as much attention as the headline has to suspect. In the aggregate, looking over months of data, employment figures become useful in spotting trends.
The bond market thinks it is going to be weak, judging by the recent move in rates, all but assuring future cuts. The equity market isn't so sure. After taking the major averages, ex NASDAQ, back to their recent highs, the rally stalled. A weak number probably means further Fed rate cuts, especially since this is the last monthly number before the next meeting. It also means slower growth, at least domestically, capping further earnings gains. What a conundrum!
How, in general, should you play these numbers? Investors should basically ignore them, using them only to determine the direction of long-term trends. Trying to trade the bond market based on the hot number of the month, whatever it is, will most likely give you whiplash. Let the professionals lose money in the half-hour after the number (although it is a zero-sum game, somebody wins). If a number (or revision) prints that few expect, there will be wild swings in prices, exacerbated by the lower, albeit increasing, levels of liquidity in the fixed income market. The hour after a big number can be irrational. Trader's years can be made or broken during that time. By the time the equity market opens at 9:30, instant analysis has been completed and the direction for the rest of the day can usually be figured out, unless there is another big number tomorrow. Happy employment Friday to all, and to all a good night.
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I agree that investors should basically ignore tomorrow's data from a timing apsect. Investors shouldn't time the market. 100K may or may not come to fruition, but tomorrow's Non-farm Payrolls report may be an improvement over last month's.
The ADP employment report was up over last month. For the past two years (I believe), the ADP report has predicted the direction of Non-farm Payroll, but not the absolute number. Though the economy may not have added 100K new jobs, the number is likely to be positive.
One area which should come into play is the service sector. Even last month, The service sector component of Non-farm Payrolls reported an increase of 65,000 jobs. ISM Non-Manufacturing was better than expected. NFP may be somewhat OK.
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