LABOUR DATA IS A WORRY FOR THE US
CFD MARKET STRATEGIST, GFT
FOR many investors the long weekend in the US couldn’t have come at a better time. On top of Europe’s sovereign debt problems, and signs that Chinese growth is slowing, recent data from the US suggests that the much-hyped economic recovery may be reversing. We have seen housing data sour following the expiry of the home tax credit at the end of April. Despite record-low mortgage rates, the housing market remains weak.
And last week’s unemployment numbers failed to offer any comfort. Weekly unemployment claims have been coming in well above 450,000 for months now, while Wednesday’s ADP survey showed that private payrolls were adding jobs, but at a very low rate and far below the levels that would indicate recovery from a normal, cyclical recession.
There was no surprise that the headline non-farm payroll number came in negative, as the drop-off in part-time census workers was as expected. But private payrolls showed only a modest increase of 83,000 jobs – well below the 112,000 estimated. On top of this, last month’s figures were revised down to 33,000 from 41,000. Compounding the bad news is the fact that the numbers included 147,000 jobs added by the Bureau of Labor Statistics’ (BLS) birth/death model. This estimates the employment created or lost by the start-up or failure of new businesses each month. These estimates are likely to be revised downwards at the biannual review next month.
While the unemployment rate fell to 9.5 per cent from 9.7 per cent, this was due to a fall in the number of people who count as unemployed. If you haven’t looked for work for four weeks, then you don’t count; and many people who would like to work have become so discouraged that they’ve stopped looking.
With the second quarter corporate earnings season kicking off next week, investors will be praying for some better news even if it only brings a temporary respite to the downward pressure on equities.