At 8:30 the long awaited
Last month the key non farm payroll component declined for the second straight month –the first back to back decline since August of 2003. The number of jobs created fell by 63,000 jobs. In addition, were it not for a rise of 38,000 government jobs the contraction in jobs would have been even more negative. Manufacturing, construction, and Trade and Transportation showed the biggest declines.
What can we expect this month?
This month the Non Farm payroll is expected to decline for the third straight month. A total of 50,000 jobs are expected to be lost. A number like this would run counter to the ADP report which projects a gain of 8,000 jobs ex government employees The employment rate is expected to tic back up to 5.0% equaling the recent high rate in December 2007. .Average hourly earnings are expected to show a gain of 0.3%, the same increase that was reported last month.
What would cause a weak number? Obviosuly the market is expected a negative number. I would think that Construction and Manufacturing would continue to subtract from job growth. As we enter the spring, the contruction area may have a seasonal bias which causes a more negative reading. Logic says that builders will not be adding the number of spring hires this year. The seasonals may magnify this dynamic.
Manufacturing via the ISM indices are showing contraction in employment. This should find its way into the numbers.
Financial activity should also continue to show declines as per the financial crisis. Let's just put it this way--- a rise in financial industry would be a surprise.
On the positive side, Health Care should continue to add jobs as the population gets older.
Government traditionally adds jobs. However, this segment becomes a wild card as municipalities should be having constraints due to slower tax receipts from slower economy and from declining house prices. Last month government added 38,000 jobs. Can this be sustained?
Leisure and Hospitality is also a wild card? Will these "luxuries" from a consumption standpoint, continue to show job gains when oil and food are taking money out of American's pocket books? What about foreign tourists who benefit from the lower dollar? The same inflation is taking foreigners money away from them, but they do get a break from the lower dollar. Is this enough to offset slower domestic demand? This area will also be watched for a change in the positive trend.
Turning to the positive, although, the unemployment rate has risen from a low of 4.4% in March, the rate is still relatively low. During the recession/slow growth period between 2001 and 2003, the unemployment rate shot up to over 6.0%. The 4.8 rate from last month is still near the bottoms. However, the rate has a tendency to shoot up rapidly if and when the balls starts rolling. Businesses don't want to be the last ones to lay off workers because of slow growth ahead. Therefore, they tend to follow the leader during times when jobs are being lost. A move to 5.3-5.4% in the unemployment rate will be an indication of the ball starting to roll.
What can happen to employment? From January 2001 to August of 2003 NFP declined for 26 out of 31 months, with one month losing 325,000 jobs and two others showing declines of 281,000 and 292,000. The 63,000 job loss last month was a low job loss month during this slow growth period. We would be watching the number today pieces today to see how the employment situation is shaking out in the different employment Industry Segments. After the number, the judgement on the direction of employment can be made.
