The last few trading sessions have delivered an apparently monumental climb in the market. This was precipitated by reports which seemed to point the way towards a potential recovery. However, today appears to be bringing a return to the more wary approach ahead of this week’s Labor Department report. A pullback may be overdue if investors begin to take profits in an attempt to preempt what may be a dismal look at jobs, and the economy.
Private employment service groups have already released numbers that pointed to higher job losses than economists anticipated. ADP Employer Services showed a figure of 371,000 jobs lost in July. The median estimate according to a Reuters’ poll was for 345,000.1 The report notes that employment “is likely to decline….albeit at a diminishing rate.”2 Of course, this report is not an official government release, nor is it associated with the nonfarm payroll release. The ADP National Employment Report is – according to their website – based on payroll data from their clients in private industry.
The rate of employment may be a lagging indicator, but the idea that layoffs will continue may undermine the overall hopes for economic stability and recovery. Today’s Challenger, Gray, & Christmas report shows that layoffs increased in July compared to June and may be picking up. Although the planned job-cuts may be lower year-over-year, they are not coming to an end.
Looking towards Friday’s offical release, the early indications are not a positive portend. If companies have been making ends meet in this latest quarter with combinations of early retirements and job cuts, the employment situation may be deeply troubled. Millions of jobs have been lost since the official beginning of the recession in December of 2007. This marks the largest decline in jobs since the depression. According to Bloomberg survey results, the outlook for the release is a jobless rate of 9.6 percent in July, and a drop of 328,000 jobs.3
Other than the critical jobs data, the indication of state of the service sector was weak according to this morning’s ISM report. The Institute for Supply Management’s Services Index was 46.4 last month versus 47.0 in June.4 This contraction was contrary to forecasts that it would rise to 49.0. The index would have to top 50 to indicate a lean towards growth rather than contraction. In fundamental conflict with this data was a separate report that showed new factory orders posting a surprise increase in June. This recovery/decline tug-of-war with economic indicators will probably provide additional fodder to encourage a possible profit-taking flight for the moment.
1 http://www.cnbc.com/id/32295270
2 http://www.adpemploymentreport.com/
3 http://www.bloomberg.com/apps/news?pid=20601103&sid=ashEW2TqcAbc
4 http://www.cnbc.com/id/32296019
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