Wednesday morning’s ADP employment report begins a three day parade of jobs data. This morning’s announcement of 39,000 jobs being lost was well below forecast and highlights the lack of economic growth. As the next two days bring Thursday’s weekly employment data and finally Friday’s nonfarm payroll report which is expected to show payrolls unchanged and the unemployment rate increasing to 9.7%, the question remains if, and when, we will see an increase in payrolls.
Looking at Friday’s consensus estimate, I have always poked fun at the incessant need for Wall Street forecasters to narrowly attempt outguessing others. Believing that their number must be “right”, all efforts are directed toward building the perfect model that generates the precise answer. I find this effort wasted as the perfect forecast has little predictive value when determining where stock prices will travel. Regardless, the Street’s obsession continues. Therefore, when I see a number that predicts payrolls will remain unchanged I must laugh. After all the work used to generate a forecast, unchanged is the best they have?
Despite my amusement, the report carries great weight. Bulls will focus on the change in private payrolls with the spin that government jobs disappearing are unimportant. I disagree. A job allows people to service their debt, save for the future, and pay their bills. Discounting job loss in one area with gains in another is indicative of the myopic focus which triggered the Great Recession. Until we see sustained job growth, the future remains bleak with stock prices range bound.