Wednesday, May 6, 2009

Job Loss Numbers May Come In Better Than Expected

Continuing the trend of remotely positive news, it looks like April's job loss numbers could potentially come in a little better than expected. That being said we are still looking at a half a million more people out of work — that number just isn't as bad as prior months. For more on this, read the following post from Kathy Lien.

Speculation that Bank of America may need $34 billion of capital has triggered fresh concern about the results of the stress tests on banks, which are due for release on Thursday. However despite these fears, there is growing evidence that job losses may have tempered with non-farm payrolls likely to see the smallest decline in 6 months. The 4 week moving average of jobless claims have moderated and yesterday, there was an impressive rebound in the employment component of service sector ISM.

This morning, Challenger Gray & Christmas reported the smallest increase in layoffs since September. According to payroll agency ADP, private sector payrolls declined by -491k last month, the smallest increase since October. Although the ADP report has been a poor predictor of non-farm payrolls, it has been relatively reliable directionally and therefore confirms our suspicion that payrolls declined by less than 600k last month.

source: Bloomberg

source: Bloomberg

Yet we still expect the U.S. economy to have lost at least 1/2 million jobs in April and for the unemployment rate to hit a 25 year high. This is indicative of weakness from nearly all perspectives, but it is a start because companies need to slow firing before they can even consider hiring. This is a step in the right direction towards a labor market recovery and why I believe the dollar will trade lower against the higher yielding currencies today.

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