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.

Category: Employment, Federal Reserve, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “NFP: Fill in the Blanks: ____ News is ____ News for Stocks”

  1. davebarnes says:

    I prefer __ News is today’s canned excuse for the market going (up|down)

  2. rd says:

    There is probably not a lot of cost cutting left in companies other than jobs and production inputs, so it is likely to require rising spending and employment to get earnings growth moving forward.

    Walmart’s probelms and the fast food worker strikes in the NYC area are leading indicators that cost cutting is largely done.

    However, government services (not including Social Security) is still where private industry was in the 1980s with respect to efficiency, so there is lots of room for improvement there over the coming decade, but not using the Norman Bates approach that the GOP has been advocating.

  3. ashpelham2 says:

    That was a nasty jobs report. The big headline number, Unemployment, will make it look like progress. But my understanding of 500k people no longer looking for work is dismal beyond belief. Hopefully this is a temporary lull.

    Also, my theory on why Europe’s recession isn’t worse is divided between governments cooking the books, and the upper 10% of Europe still doing well, and spending enough to keep the GDP’s from falling through the floor. Those unemployment figures in Spain and Greece have always been higher than here, but they are truly staggering right now.

  4. Old Rob says:

    In countless blogs, media stories, etc, in the current line of Federal B***-***t, why can’t this country begin to reimpose the Smoot – Hawley tariff (it seems as a line we can’t possibly cross)?
    The current economic world will end badly; why not accelerate it and put ‘real’ Americans back into a tax paying position? Sure, a pair of shoes at WMT will no longer be $50 but $100, but at least the Feds can get their hands in the pockets of more tax payers. During the Depression it made things worse since we were the exporter to the world. We are now the inverse and perhaps it might be a net positive. I know 99% of the so called ‘experts’ dare not mention Smoot-Hawley, but I would like to find a good explanation of why it could not work when most of everything ‘real’ people buy comes from outside of this country.
    I can’t compete with improved production methods, robots, etc, but I can make laws to change perspective without becoming a Luddite.

  5. dina says:

    There is also a good news today about jobs. US receives 50,000 packages of H-1B visa applications on first day. I think the demand is only for highly skilled workers or skilled workers who are ready to work for low wages(immigrants).

  6. Concerned Neighbour says:

    On a serious note, the jobs number sucks and hopefully it’s a one time deal.

    As with just about every day, I expect bad news to be bad news for stocks early in the day, only to be followed by another miracle pump in the afternoon by “bargain hunters” to make everything better.

    I hope no one missed the fact that the Nikkei hit 13K last night. I’m sure BR and his readers will recall that 13K is the level that Japanese Minister “hoped for” (wink wink, nudge nudge) by March just a few short months ago when the Nikkei was trading far lower. Funny how he got his wish, albeit a few days short.

    Maybe Mr. Bernanke should also publicly “hope for” (wink wink, nudge nudge) a level for the DOW. After all, even with the indefinite pump of $85B per month, the “rally on fundamentals” seems to have stalled out the last couple of weeks.

  7. spooz says:

    I have a hard time seeing the data as unbiased when 633,000 more people have been classified as not in the labor force. Makes the BLS look like a tool for CONfidence building, as if that is all it takes to get the game rolling again.

  8. eliz says:

    I just posted a 1/2 time position two days ago. 40+ applicants so far (95% somewhat to over qualified), and I am in the Pacific NW, where employment numbers are allegedly good. That is all I need to know about the employment situation. It is a jungle out there. I feel for everyone looking,

  9. Smokefoot says:

    Wasn’t it just yesterday we were looking at the withholding taxes as being higher? How does that square with low job gains and huge numbers of people no longer looking for work?

    @Old Rob – assuming you are serious about bringing back Smoot-Hawley, the problem is that other countries will implement tariffs if we do. We are a net importer, but we are still one of the largest exporters in the world, and a trade war would devastate our economy.

  10. A younger, somewhat different-minded Barry Ritholtz used to analyze this report in detail, scrutinizing key metrics that highlighted turning points in the economy. What would that analysis show this month?

    Two key metrics of that prior analysis included average workweek (up = better) and use of temporary help services workers (up = better). The first number is in the headline press release and the second is buried in Table B-1. Both can be viewed as indicators suggesting that more (or less) work is being demanded, indicating hiring pressure (or firing pressure). Both indicators were up a tad in this report, both year-on-year (no adjustments needed) and month-over-month (either unadjusted or seasonally adjusted). So perhaps the weak headline number is the anomaly, and the economy is still plodding along with slow but steady growth.

    Some other observations from the data:

    Table A-16 from the Household survey includes an effort to identify multiple jobholders, and shows that multi-job holders are on the rise, up 140K year over year. This should be subtracted from the payroll survey’s annual gains, since that survey counts payrolls rather than people. The payroll survey shows just under 2000K new jobs, and the household survey shows that about 1 in 20 workers has 2 jobs, so with a gain in 2000K jobs one would expect 100K new multiple-jobholders. The measured rise of 140K is a little high, but not too far out of line for a year-over-year data series. So the doom-and-gloom worry that a small portion of the population is taking on multiple jobs while others are jobless doesn’t seem borne out by this data.

    On a tangential note, it’s interesting that Table A-13 shows “Management, Professional and Related Occupations” have an unemployment rate of only 3.6%, while the other occupation tables have U-3 rates ranging from 7.4 to 15.8% (SA), except for “installation, maintenance and repair” at 4.8%. That reinforces the “two economies” argument that one part of the economy has labor shortages (or at least adequate opportunity to work), while the rest is depressed.

    In the same table, the “housing recovery” meme loses some luster when reading the row labeled “construction and extraction occupations” – that group has the highest UE rate at 15.8% (yes, seasonally adjusted). If housing construction is allegedly impaired by resource shortages including labor shortages, why is this UE rate so high?

    • I have come to learn that individual NFP matters much less than I used to think it did. The overall trend is what is significant.

      But you are right about Hours worked, temp help and wages — they are still a significant component

  11. Old Rob says:

    Regarding Smoot-Hawley, I realize that we are one of many exporters in the world(ref: @Smokefoot) , but we have basically exported labor to less costly countries to the detriment of tax collection (i.e. income taxes) and the resulting drain of dollars in the form of spreading welfare of all forms. There are productivity improvements which can reduce labor costs, but the only basis for global trade is the search for the cheapest labor structure without the concomitant flow of funds to our government. Maybe that’s good in that it chokes of government spending, but we need to employ huge numbers, not sustain them via government expenditure. If that results in fewer bulldozers being exported; so be it. I am more interested in the net inflow of jobs and work. We export nothing unique on a very large scale. I would like to see some technical information on the implications of Smoot-Hawley today versus during the Great Depression. Right now it is just the argument of trade retaliation; not a really big deal for us.