Market Talk

I've been here a year, Jack; when do you think the jobs are coming?

Here’s your takeaway from the jobs report: The jobs market isn’t getting any worse. It isn’t getting any better either.

Nothing much changed in August for the nation’s work force, and nothing much has changed in the past year either. The Bureau of Labor Statistics reported 54,000 people lost their jobs in August, with 114,000 temporary Census Bureau workers coming to the end of that gig, while the private sector added 67,000 jobs.

Now, the stock market is reacting because the numbers were the proverbial “better than expected.” Consensus was for an overall slide of 110,000, with private sector adding 28,000 jobs. That’s all the market cares about, and seeing as it’s in rally mode anyway, it’s set to extend that rally.

This is such a middling report, it can probably be spun any way you’d want to spin it, so it’s best to try and look at the biggest picture possible. I’ll frame it this way: we’re eight months into 2010, and the economy has added a net total of 723,000 jobs. Job growth rose the first five months of the year, and has fallen the past three months. That averages out to 90,000 jobs a month, which is not even enough to keep up with population growth, forget starting to whittle down that 15 million-strong sea of unemployed people out there.

So this report is nothing to get all hot and bothered over, even though the stock market undoubtedly will.

There were some positives, let’s not kid ourselves. The revisions to July and June narrowed the losses in those months, which is a good thing. The number of people out of work for more than six months slipped to 42% from 45%; still a distressingly high number, but still a slight improvement.

However, the official unemployment rate edged up to 9.6%, and the broadest measure of unemployment, the U-6, rose to 16.7%. A year ago this time, the official rate was at 9.7% and the U-6 was at 16.8%, and haven’t changed dramatically during the entire time, so we’ve gone essentially nowhere in a year. If you believe the recession ended in July 2009, as so many do, then you’re talking about a year that was supposed to be a year of recovery for the economy. The jobs market didn’t get that memo.

“It will take many years before ‘full employment’ is re-attained,” Steven Wood of Insight Economics wrote. In August, there were 14.7M people unemployed (according to this table; in the actual release, BLS says it’s 14.9M); in August of 2009, there were 14.8M people unemployed.

Positive tone carries on for stocks around the globe as most Asian markets saw gains overnight and European markets are currently rising moderately.

US stock futures subdued premarket in anticipation of the August payrolls report, due at 8:30 a.m. ET. Economists look for the shedding of 110,000 jobs, mainly dismissed Census workers, offset perhaps by some anemic increase in private payrolls. Prior months’ revisions should be interesting, and curious to see if the labor force continues to contract, the key factor that’s kept the unemployment rate steady since the spring.

ISM August non-manufacturing index due at 10:00 a.m., and then look for the crowd to thin into the holiday weekend.

S&P futures down 1.60, DJ futures down 10. Ten-year note lower, yield at 2.64%.

- Soaring currency trading volume won’t have a happy ending. “It is a Fool’s Goldrush and will end horribly for most,” Josh Brown writes at The Reformed Broker. “The good news is, you can take the cautionary tales of the stock game, the mortgage game and the real estate game and figure out how you want to be positioned when the inevitable boom-bust-hatred cycle shifts into high gear.”

- Former Lehman CEO Dick Fuld was given a “surprisingly sympathetic ear” from the FCIC at yesterday’s hearing. “This is a deeply disturbing development,” Barry Ritholtz says at The Big Picture. “It leads to the unfortunate suspicion that the FCIC does not have the slightest clue as to the causes of the housing collapse, recession and market crash…I now fear the FCIC report is going to be an ideological farce.”

- It’s becoming obvious there is “no magic bullet” to immediately speed up the recovery, Harvard economist Kenneth Rogoff writes. “It took more than a decade to dig today’s hole, and climbing out of it will take a while, too,” he says. “Americans will have to be patient for many years as the financial sector regains its health and the economy climbs slowly out of its hole.”

- Investor demand for US Treasuries has waned over the last few sessions after some better-than-expected economic reports. But the “big test” comes tomorrow morning with the August nonfarm payroll report. “A smaller loss of jobs could stoke more optimism about the economy and raise more questions about how much lower interest rates can or should go in the near term,” LA Times’ Tom Petruno says. “But a bigger loss could re-energize bond bulls.”

- Yesterday was a 90% upside day, “the 13th such so-called panic-buying day since the April 26 high,” Jeff Cooper notes at Minyanville. Meanwhile, there’s been 14 panic-selling days during the same period, he says. “This kind of volatility is a market in disarray. It’s not a sign of a healthy market,” he says. “Risk runs high when frenzy runs deep.”

- Slate’s James Ledbetter wonders why people consistently underestimate Netflix (NFLX). “There is one company that has been more consistently underestimated than any other, whose innovations, growth, and, indeed, survival have been dismissed and denied for nearly all its corporate life. That’s Netflix,” he says. But “while its critics were flailing away, the company has continued to grow steadily and spread its influence well beyond the red envelope.”

- AOL renewing and expanding its search agreement with Google (GOOG) was a “surprisingly quick and even stealthy move,” Kara Swisher reports at All Things D.

- “Summertime, and the living is easy…for many, too easy. This July was the worst on record for youth employment: Less than half of all 16- to 24-year-olds had a job,” WSJ’s Heard on the Street says. “Meanwhile, at the other end of the spectrum, more than 40% of over-55s have work or are looking for it, the highest share since JFK was in office.”

- Housing prices still need to drop by 10% in order for the market to correct itself, Barry Ritholtz tells Tech Ticker.

- For all the runners out there, WSJ’s Nick Wingfield reviews three running apps.

US stocks rise for a second session, albeit not as sharply as during yesterday’s rally, as another batch of economic data gives some hope to the bulls.

DJIA rises 51 (0.5%) to 10320, S&P 500 gains 10 (0.9%) to 1090, Nasdaq Comp up 23 (1.1%) to 2200. NYSE volume’s low.

Today, it was a better-than-expected report on pending home sales that the bulls seized on. Jobless claims remain disturbingly high as 472,000, but no matter there’s a rally on. Dell bows out of 3Par sweepstakes after H-P raises its bid to $33/share.

Of course, what really matters is tomorrow morning’s monthly jobless report.

With emerging-market stocks trading at their highest valuations in more than two years, relative to developed market stocks, “a number of analysts and strategists are starting up a chorus that sings the phrase ‘this time it’s different,’” Ticonderoga’s John Stoltzfus writes, “and it makes us not just a little nervous.”

After nearly three decades “walking the beat on ‘investment street,’ we’ve never heard or known the phrase ‘this time it’s different’ to ring true for too long before some kind of proverbial ‘Terminator’ or ‘Black Swan’ arrives on the landscape,” he says.

And don’t buy the whole “decoupling” spiel that’s being thrown around again, either.  It’s too early for that, Stoltzfus says.

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Investors have kicked September off on a strong note. But significant technical resistance, as well as fundamental negativity, continues to plague S&P 500 at current levels.

From a technical perspective, it’s tough to make a bullish case for the broader market right now, even after yesterday’s run-up, according to Bespoke Investment Group. Firm notes the S&P 500 is currently sitting just above its 50-day moving average. But it’s still lingering too close for comfort as it hasn’t been able to significantly shoot higher all morning.

“The 50-day acted as a point of resistance (yesterday) that just couldn’t quite be broken,” Bespoke says. “For those hoping that the upside momentum will continue, it will be important to see a close above the 50-day in the next couple of days.”

S&P 500 was recently up 5 at 1086, with the 50-day at about 1080.

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Stocks aren’t seeing any follow-through today from yesterday’s rally, and while the session isn’t over, how the markets react after that rally will tell you everything you need to know about how “real” the rally itself was.

Meanwhile, there’s more M&A news, with H-P once again upping its bid for 3Par. Also, gold is back around its record closing price of $1,257 (currently at $1.253.90.)

That’s what we’re talking about on the Markets Hub.

99ers, back in the day.

Are people finding jobs, or falling off a cliff?

Today’s weekly jobless claims report from the Labor Department includes information on the number of people claiming emergency insurance, the folks who have exhausted the “normal” 26-week unemployment bennies, and are applying for the second, third and fourth tier of benefits, the ones that take unemployment insurance up to 99 weeks.

Labor reported today that 281,676 fewer people applied for the emergency unemployment compensation benefits in the week ended Aug. 14 (these number are reported at a two-week lag to the initial claims numbers.) That lowered the total to 4.5M, still higher than the 3.1M on the rolls a year ago this time. But it’s an improvement. It’s good news. Right?

Well, it depends. If people are surrendering these claims because they’ve found jobs, then it’s an unquestionable good. But there’s no evidence that’s the case. While I’d find it hard to believe that out of nearly 300,000 people, none of them found work, I don’t know that I’d bet the majority of them have. More likely, a disturbingly large number of those people have become 99ers.

“As always, we have no idea what percentage of people, if any, have simply run out of benefits or what percentage has found jobs,” Miller Tabak’s Dan Greenhaus wrote, “but if the latter is the reason for the drop, that is unquestionably a positive.  Additional data on this front can be found in tomorrow’s payroll report when we see the breakdown of unemployment durations.”

Almost half of the nation’s unemployment see their bout last more than six months. From there, it’s estimated that something like 1.4 million go all the way through the 99 weeks. Here’s good breakdown of the situation from the Columbia Journalism Review (albeit, a bit outdated as it’s from July.) Think about that number. It’s almost the size of the nation’s armed forces (active forces, that is.)

That’s an veritable army of unemployed people out there, who have been so for two years. That’s some development, I’d say.

US stock futures essentially flat on the heels of yesterday’s spike higher. European markets roughly flat, after the continent’s own scorching rally yesterday, while Asian stocks posted strong gains overnight.

As noted premarket yesterday, Wednesday’s action isn’t uncommon in a new month’s early days, and as we’ve seen lately, both rallies and sell-offs can come and go in the blink of an eye.

Weekly jobless claims, revised 2Q productivity and labor cost gauges both due at 8:30 a.m. ET; July pending home sales, and factory orders both out at 10:00 a.m. August chain-store sales reports also roll throughout the morning.

S&P futures up 0.20, DJ futures up 1. Ten-year note lower, yield at 2.59%.

US stocks burst out of the gate in September, with the DJIA posting its best one-day gain since early July after a key gauge of the manufacturing sector shows surprising strength.

DJIA surges 255 (2.5%) to 10269, its biggest one-day gain percentage-wise since July 7. S&P 500 jumps 31 (3%) to 1080, Nasdaq Comp rises 63 (3%) to 2177. NYSE volume is 4.5B shares traded, not bad volume for a session a couple days ahead of Labor Day.

Stocks rose sharply early, as traders were apparently emboldened after the S&P held the 1040 level again yesterday. But the ISM reading, coming in not just better-than-expected but actually better, was like rocket fuel. September has a reputation for being a bad month for stocks, but it also often starts off well. It did today.

Now, that lede (newspaper jargon for “lead,” the top of the story, not  be confused with lead, the material they used to use to fill the letter blocks when printing the paper,) I wrote is without a doubt a concise, accurate assessment of today’s session, if I do say so myself. However, I find it hard to believe this rally was built on anything more lasting that Friday’s rally, which had just about completely melted away by yesterday’s closing bell.

Briefly, let’s look at some of the news today. There was that Chinese PMI story. China’s official PMI rose to 51.7 from 51.2. That sparked the global stocks rally. Now, that’s a very minor move, one that still leaves the index too close to the 50 level for comfort in a diffusion index that measures not actual change but the rate of change.

Still, with the proverbial new money pouring into the market, that was enough to get things going. The market totally ignored a trio of private-sector takes on the jobs market, the ADP, TrimTabs and Challenger Grey reports. ADP said private-sector jobs fell 10,000, TrimTabs said it was down 65,000. The Challenger report was actually bullish, they said job cuts fell to a decade low. Still, those first two do not presage a good number Friday when the BLS reports the nonfarm payrolls. But no matter, because the ISM’s take on US manufacturing came in at 56.3, up from 55.5, when it was expected to slide to 52.

What makes it so surprising is that absolutely everybody expected it to fall, given that the regional Fed surveys have been uniformly depressing. So, is the ISM number a one-off or some counter-trend? I just don’t know yet, but I’m very suspicious of the ISM number. It just doesn’t fit in with anything else we’ve been seeing.

Lastly, we’ll leave you with this, a tidbit that John pointed out to me just now. As bad as August was for stocks, May was that much worse, with the DJIA losing better than 8%. What’d the Dow do on the first trading day in May? It rose, about 143 points. Over the next four sessions, it lost 771 points, a time frame that included the now-infamous Flash Crash.