Wednesday, April 01, 2009

ADP jobs #, GM update....

The ADP jobs survey - which is notoriously bad at predicting actual jobs data from the government - was released this morning and their data continues to show an ugly jobs market.

"Companies in the U.S. cut an estimated 742,000 workers in March, pointing to no relief in sight for the labor market amid the longest recession in seven decades, a private report based on payroll data showed today.

The drop in the ADP Employer Services gauge was larger than economists forecast and the most since records began in 2001.

It's important to note that if this data is accurate companies cut more workers than at any point in last 8 years while the stock market was having its biggest rally in 70 years. Companies that are expecting a sharp snapback in demand don't cut workers.

Despite all of the stimulus, etc, etc, jobs are the key to the economy and I don't see any inflection in the jobs market.

When you consider the spending that's been proposed to generate maybe 3 or 4 million jobs, losing 3/4 of a million jobs per month is pretty sobering. We'll get the actual jobs data from the Government on Friday - watchout for continued statistical games in the birth/death model.

Frankly, I'm stunned that the news that President Obama has already determined bankruptcy is the best option for GM and Chrysler isn't a bigger story today.

"President Barack Obama believes a quick, negotiated bankruptcy is the most likely way for General Motors Corp. to restructure and become a competitive automaker, people familiar with the matter said."

While I tend to agree with the conclusion, I think telling GM that they have 60 days to get their house in order and then leak to the press the next day that bankruptcy is the best option is not going to help the situation.

The fact that the banks and AIG have skated away with billions and thus far avoided bankruptcy is stunning. It's a double standard that is unfair to the auto industry, in my opinion.

Possible market movers for the rest of this week.......

1) News or lack of news from the G20
2) FASB caving to Congress on Mark to Market (or not)
3) Monthly jobs report on Friday
4) Earnings preannouncements

Finally, one comment on earnings. The larger companies might really struggle (with the exception of some like IBM that have large services business - when IBM meets their number please don't fall for the hype - I swear that CNBC has the "Does IBM's quarter signal a turnaround for tech?" story already written), but some smaller companies might skate through the quarter.

What I'm hearing is that business is being pulled forward. A deal that might have normally closed in Q2 or Q3 has been pulled forward to make the Q1 number. While this might give the market some encouragement, I'd caution that this creates long run problems --- who will you sell to in Q3/Q4 if you've exhausted all of your leads to make your Q1 quota?


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