Where Are the Jobs?

by: Ockham Research

This morning’s ADP report on private payrolls showed a 13,000 gain which was less than a quarter of the consensus estimate of about 60,000. The most bearish of all economists surveyed forecasted only 23,000 jobs gained, but even that tepid growth proved to be much too aggressive. This may suggest another soft report on Friday when the government reveals non-farm payrolls, which would surely be troubling to the market which has showed renewed concerns over global growth. Admittedly, the ADP report comes from a much smaller subset of data derived 500,000 business employing over 21 million workers, while the government statistics aim to encompass the entire workforce.

Today’s ADP report showed a decrease of 17,000 workers in goods-producing industries including manufacturers and construction companies. Employment in construction fell by 35,000, while factories added 16,000 jobs. Service providers added 30,000 workers.

Companies employing more than 499 workers expanded their workforces by 3,000 jobs. Medium-sized businesses, with 50 to 499 employees, added 11,000 jobs and small companies decreased payrolls by 1,000, ADP said.

“The recovery in the jobs market is very, very sluggish at this point,” Joel Prakken, chairman of St. Louis-based Macroeconomic Advisers LLC, which produces the figures with ADP, said in a conference call. “There’s really no way to characterize this number other than disappointing.”

While payrolls have increased each month this year, it may take years to recoup the more than 8 million jobs lost since the recession began in December 2007, the most of any downturn in the post-World War II era. – Bloomberg.com 6/30/2010

We continue to believe Friday’s report will be a key factor for the near term market direction as investor sentiment could really use a boost right now. However, with this ADP report in mind, it is difficult to imagine robust private sector job growth and even public sector permanent hiring (excludes temporary census workers) is extremely weak as public deficits expand. With many businesses uncertain about the future and government budgets stretched already, we have to wonder where the jobs are going to come from. The weight of such a large number of Americans unemployed has to catch up with the market as consumer spending and the housing market will likely continue to struggle.

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