A Different Kind of NFP Preview

by: Cam Hui, CFA

The headline blared: JP Morgan warns of an even more disappointing NFP.

The Non-Farm Payroll number that gets released Friday will be watched closely by the markets for a clue as to the strength of the US economy. The problem is, the NFP figure is notoriously noisy.

Watching the employment and temp agency stocks
Instead of monitoring employment statistics, there is another real-time indicator of employment confidence that gets updated every day - that's the performance of the employment and temp agency stocks. So let's take a look at some of the relative performance of the stocks in this industry. The two biggest are Manpower (NYSE:MAN) and Robert Half International (NYSE:RHI), with market capitalizations of about $3.7b apiece.

The price performance of MAN looks awful. It is obviously in a well-defined downtrend relative to the market. Click to enlarge:

RHI looks a bit more constructive. The stock rallied above the relative downtrend line, but relative price performance remains weak. Click to enlarge:

Analysis of this industry is hampered by a number of factors. There aren't a lot of publicly traded companies in the group and some of the stocks are moving on news, e.g. Kforce (NASDAQ:KFRC) and SFN Group (NYSE:SFN).

Looking at some of the other smaller cap companies, Kelly Services (NASDAQ:KELYA) remains in a relative downtrend. Click to enlarge:

...but TrueBlue's (NYSE:TBI) relative chart looks like it may be stabilizing its recent trend of underperformance. Click to enlarge:

Overall, the relative returns of the stocks in the group can only be characterized as weak. Given these conditions, don't expect too much from the NFP release on Friday.