August 05, 2011 at 09:35 AM EDT
The Trading Day
GREEK FACTOR: MODERATELY POSITIVE
Stock futures had already turned green before the jobs report, after overseas markets reacted to the 4.3% decline in the Dow marked on Thursday. When the Employment Report hit the wire, it offered relief more than anything else, as the numbers were generally better than expected, with the usual caveats and questions. Despite the declines in indexes overseas, I see global stresses generally eased Friday, and given the deep decline coming into the day, we have assigned a moderately positive Greek Factor to the American trading morning. As the day progresses, the absolute values of the jobs data and reminders of recently weaker economic data should undermine investor confidence heading into the weekend. Whether that drives a green day into the red is uncertain here.
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The Trading Day
Employment Situation Report
Greek Factor: Positive
Relative to expectations, July’s Employment Situation Report was mostly positive, however, on an absolute basis, the figures remain deeply depressing. Given that the market has given up so much ground through the week, this report seems to lend to stabilization, if not buying.
Nonfarm Payrolls increased by 117K in July, better than the 75K tally of expectations taken by Bloomberg. Private payrolls also rose better than expected, increasing by 154K, against expectations for 108K. The private sector figure exceeded the high end of the economists’ range in fact, which was set at 150K. The market should also be enthused Friday by positive revisions to June’s payroll data. June payrolls were revised to +46K, up from the initially reported +18K. June’s private payrolls were ratcheted up to 80K from the 57K initially reported.
The Unemployment Rate improved in July to 9.1%, from June’s 9.2%. The result was within the range of expectations, but beat the consensus set at 9.2%. This is another positive data-point, except for skepticism around the result, given the labor participation rate fell. In the end, market enthusiasm may fizzle as the absolute values are understood as still weak enough given recently softer economic data that could lead to deterioration in labor.
We’ll have a more detailed analysis of the ESR in a follow up article.
Monster Employment Index
Greek Factor: Neutral
Monster World Wide (NYSE: MWW) published its Monster Employment Index (MEI) this morning for the month of July. The MEI is a measure of online job demand, and so, as should have been expected, it indicated a deteriorated situation last month. The MEI dropped 2 points when measured against June, falling to a mark of 144. The mark was still 4% better than last July’s 138 record, and that made 18 consecutive months of year-over-year improvement. Monster attributed the monthly decline to seasonal weakness, indicating it was in line with its expectations. All metro markets measured showed year-over-year improvement. The data-point is not widely followed nor assigned great weight by the market, and so its modestly positive news should have no effect on trading today given more important data released elsewhere.
Data on Tap for 3:00 PM EDT
Economists surveyed by Bloomberg are looking for credit expansion of $5.0 billion for June, following May’s expansion of $5.1 billion. Credit has been expanding for more than a year now, which is a good sign for consumer strength and speaks to expanding bank willingness to extend credit.
Greek Factor: Neutral
Global markets declined Friday before the U.S. opened, following Thursday’s steep drop in the U.S., with the Dow shedding 4.3%. Some good news was found in easing pressure on Italian and Spanish credit spreads after a rather rough week. It’s best not to read too much into the deep drops across the major global markets, as they simply reflect US trading from Thursday. Global markets mostly follow the lead of the important US market on deep down days.
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