Economy Losing Steam, Again - Ahead of Wall Street
05 Abril 2013 - 6:45AM
Zacks
Friday, April 5,
2013
The drumbeat of negative economic news continues, with the March
non-farm payroll report coming in today significantly weaker than
expected. Coming after this week’s weak readings from the ISM
surveys and Automatic Data Processing (ADP), today’s ‘miss’ materially raises the odds that
the economy is heading back towards a ‘Spring Swoon’. Such an
economic backdrop is simply not consistent with a stock market that
was at all-time high levels. What this means is that if the economy
is trending down, then look for that same trend to take effect in
the stock market as well.
The ‘headline’ March jobs number of 88K came in significantly lower
than expectations of about 200K and February’s 268K level (revised
higher from 236K). The consensus estimate did not fall much
following the weaker than expected report from ADP on Wednesday,
though a number of analysts cut their estimates post-ADP and the
‘whisper’ number was reportedly close to 150K.
The revisions trend was positive, with net positive revisions to
February and January adding 61K to the total. In a way, the sum of
the ‘headline’ 88K and the positive net revisions for the preceding
two months takes to the ‘whisper’ number, but that’s hardly any
consolation at this stage. Average weekly hours for the private
sector ticked up to 34.6 from 34.5, while average hourly earnings
were barely up at $23.82 from $23.81. The labor force participation
rate went down to 63.3% from 63.5% last month, the lowest level
since 1979. And that’s the reason why the unemployment ticked down
to 7.6% in March from 7.7% in February.
Private sector jobs totaled 95K in March, down from 254K in
February and 148K in January. The government sector shed 7K jobs in
the month, with the postal service losing 12K jobs. The private
sector gains were concentrated in professional and business
services, and healthcare, while retail lost jobs. Professional and
business services added 51K jobs in the month, bringing the
industry’s 12-month tally to 533K. Construction added 18K jobs in
March, confirming the positive housing momentum. Retail’s
surprising loss of 24K jobs in March likely reflects the impact of
the end of the payroll tax holiday
If the jobs miss was just one report, then it would probably not
matter that much. But since it’s coming after other soft readings
this week, investors will be justified in concluding that the
economic backdrop wasn’t as robust as earlier data suggested.
Economic data for January and February was clearly favorable, which
prompted many analysts to raise their GDP forecasts for the first
quarter to as high as 3.5%. What this week’s data shows is that
while those estimates may be a bit on the optimistic side, but
extrapolating that trend to the rest of the year is definitely
without a basis. This isn’t good for the stock market, but it does
ensure that the Fed will remain on its easy money beat.
Sheraz Mian
Director of Research
AUTOMATIC DATA (ADP): Free Stock Analysis Report
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