March 2, 2011
Sheraz Mian
Director of Research
The labor market remains in focus the rest of this week, with a critical report coming out each day. In the run-up to the government’s Nonfarm Payroll report this Friday, we get the monthly ADP report today and the weekly Jobless Claims numbers tomorrow. These reports will help the market handicap the likelihood of the Friday jobs number coming in the vicinity of the expected 200,000 level.
The ADP number this morning came in signficantly better than expected. February job gains totaled 217,000 compared to expectations of around 170,000, with strength across the board in all major sectors.
This is the third straight month of positive outperformance in the ADP report. In January and December, the strength in the ADP report was not reciprocated by the subsequent government report. I am confident that we will reverse this trend on Friday, but we will have to wait for two more days to find out.
There is healthy tension in the market between the forces of economic recovery and rising oil prices. The fear is that if oil prices keep rising and then remain elevated for an extended period of time, it would stall, even reverse, the economic recovery.
The economic reports that we get on a day to day basis, whether favorable or otherwise, reflect ground-level conditions in the rearview mirror before the latest oil spike took hold. As such, the market finds them unhelpful in figuring out the outcome of the tension referred to above.
I think that the market will find today’s ADP report reassuring. But the key to its response will be what is going on in the oil market.
P.S. What is Zacks Ahead of Wall Street? To find out more about , , Zacks Ahead of Wall Street, click here.
Zacks Investment Research
