U.S. Jobs Report Could Be Tipping Point

by: Larry MacDonald

Like a bridge over troubled water, the U.S. job market could be finally caving in. At least that is what a raft of recently released employment indicators may be suggesting.

- the Rasmussen employment index, a measure of workers’ views on job security, fell in June to a record low of 78.6
- TrimTabs, which extrapolates U.S. Treasury tax collections, estimates a drop of 133,000 jobs occurred in June (and adds that the acceleration in losses in the last two weeks of the month suggests a plunge of 300,000 jobs in July).
Automatic Data Processing (NASDAQ:ADP), a major payroll processing company, reported a loss of 79,000 private-sector jobs in June (having reported a 142,000 net increase in jobs up to May).

Tomorrow, the Bureau of Labor Statistics [BLS] releases its June numbers on non-farm payrolls. Last heard, the consensus projection was for 55,000 job losses -- which seems to be on the low side considering the weakness in the Rasmussen, TrimTabs, and ADP stats (which are known to foreshadow BLS numbers). Indeed, today’s sell-off in the U.S. stock market appears to be anticipating the overshoot.

If the actual losses come in substantially higher than expected, financial markets may continue selling off. In fact, some analysts, like Kathy Lien, expect the reaction could be rather severe: she notes: “If payrolls come any where near -90k, the dollar would collapse against the Euro as the market questions the viability of a 2008 rate hike by the Federal Reserve.”