Thursday, September 01, 2011

Feel free to dismiss any forecasts you hear about the jobs report

The numbers are all over the map forecasting tomorrow's jobs number. The current consensus is for about 70,000 jobs but that number is falling fast (Goldman cut their estimate from 50k jobs to 25k jobs today) and some are even predicting a negative number. Here's the deal: it doesn't really matter if the number is 50k, 30k, or 80k. We are producing jobs at a rate far below what would be considered normal for this point in a recovery. I mentioned to a friend that this game of beating expectations is like saying "we expected 500 houses to be submerged by Irene, but only 496 were actually flooded so it's RALLY TIME!". The reality is that the job market is weak (and anectdotal evidence suggests it's getting weaker) and nothing - not tax cuts, stimulus plans, or QE3, QE4 or QE5 will change that. Until demand for goods and services increases businesses will not begin hiring. Anyway, back to the jobs number - I think the smart money would say somewhere around 40k jobs might be a good guess, but I think there is a fair chance that some of the blackbox data is going to throw the number off. I think there is a chance that the number is above expectations if certain things fall into place. That brings us to the market's reaction - a bad number would signal an economy stalling out and confirm beliefs that Pres. Obama will offer additional stimulus and the Fed will expand the expected QE3. Thus, stocks could rally on bad news. A great number - 100k+ - might lead some to reduce their expectations of government intervention which might cut the legs out from this sharp rally we've since Bernanke started talking 2 weeks ago. I'll try to post a quick update after 8:30am.

1 comment:

Tim Abel said...

"Until demand for goods and services increases businesses will not begin hiring."

Its about time somebody on the business end said it. I just wish Washington would hear it.