Market Commentary

Today the all inclusive employment data is released.
July 02, 2009

Today the all inclusive employment data is released.  Will it nullify or validate my long held view of a 25% probability the economy could expand during the second quarter, an outlook I will readily accept as close to outlandish.

Yesterday Martin Feldstein, former of head of the National Bureau of Economic Research (NBER) which is the official arbiter of dating recessions, stated the change in GDP “will be closer to zero or even a small plus of the April to June period.”

His reasoning is similar to mine…draw down inventories, massive fiscal and monetary stimulus, etc.

Because employment transcends all aspects of the economy, it is viewed as the “Grand Daddy” of all statistics.  I must also write, however, unemployment is a lagging indicator and typically rises even as the economy is recovering.  But again I ask rhetorically did employers over react from September-April, panicky firing to many employees fearing for survival?

As widely discussed nonfarm payrolls posted declines ranging roughly from 600k to 750k per month—an astronomical amount--for five straight months from November through March but then fell just 504k in April and 345k in May.

Consensus is estimating a 345k decline.  I must write the maligned ADP Employment report that was released yesterday was considerably higher than expected thus suggesting a potential downside surprise for the Bureau of Labor Statistics report released today.

Turning briefly to yesterday’s market action, equities posted gains on further evidence the manufacturing sector is recovering.  The ISM rose for the sixth consecutive month albeit the data is still under 50, the demarcation point between an expansion and contraction.  Pending home sales also rose for the fourth consecutive month, the first such occurrence since the four month period ending October 2004.

Obviously today’s trading will be influenced the employment data, trading that could be volatile given the potential dearth of participants because of the long holiday weekend.

Speaking of which, please take time to reflect upon the significance of Saturday.  We live in a great country where our freedom permits novel and unrestrictive thinking, a freedom that has created the most powerful country this world has yet experienced.

Last night the foreign markets were down.  London was down 0.78%, Paris down 1.21% and Frankfurt down 1.60%.  Japan was down 0.64% and Hang Sang down 1.09%.

The Dow should open moderately lower but this can change dramatically given the significantly of the jobs data at 8:30.  The 10-year is off 2/32 to yield 3.54%.