Market Commentary

The headlines of the vast majority of newspapers carried the headline
November 09, 2009

 The headlines of the vast majority of newspapers carried the headline “Unemployment is at a 26 year high of 10.2%.”  I am relatively certain most articles contained statements suggesting that 11% is all but inevitable. 

Against this background however I think the report contained several hopeful signs.  Nonfarm payrolls did decline by 190,000 slightly higher than the consensus view of a 175,000 drop, but prior data was revised up by 91K.

Additionally the October number appears to have been artificially held down by a very large seasonal factor which subtracted 831K from the raw data.  That factor was heavily affected by last year’s fourth quarter collapse in hiring and almost certainly overstates the true seasonal pattern.

The 0.4% jump in the unemployment rate to 10.2% was concentrated among younger workers as the rate for the 25 plus bracket only edged up a tenth of a point.  Average hourly earnings rose more than expected, factory workweek did edge up a tenth of an hour, and a 34K jump in temp jobs appear to bode well for acceleration in permanent hiring in the months ahead. 

Incidentally most will accept a rise in temporary employment precedes a rise in full time employment.  As stated above temp workers rose by 34,000, the biggest monthly increase in two years and the third consecutive increase.

One disappointment was that the overall workweek failed to rebound holding at 33.0 hours.

Are these observations the major factor why stocks were essentially unchanged Friday?  Probably.  It is against this backdrop and Thursday’s sudden resumption in the decline in initial jobless claims, validates my view that job creation could occur by 1Q10.

Some might state this is a Pollyannaish view, vastly different than prevailing wisdom.  As stated several times it is rare that most adopt a similar opinion and in most instances the masses have been wrong. 

What will occur this week?  Earning season is almost over and a record 83% of companies who have posted profits have exceeded expectations.  [Bloomberg]  Economic releases are scant.  There is a mid week national holiday that closes banks and the bond market.  Do I remotely suggest it could be a potentially quiet week was all reconcile the events/data of last week?

What a radical thought.

Last night the foreign markets were up.  London was up 1.34%, Paris up 1.64% and Frankfurt up 1.19%.  Japan was up 0.20% and Hang Sang up 1.73%.

The Dow should open moderately higher on economic optimism.  The 10-year is unchanged at a 3.50% yield.

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