Market Talk

- Considering the “uncomfortably uncertain” mood heading into this morning’s jobs data, the report wasn’t that bad. “The overall picture is of a labor market that continues to chug along in the right direction, albeit far too slowly,” Ryan Avent notes. “The pace of employment recovery implies several long, hard years ahead for American workers. But given the mood on markets and around dinner tables lately, one has to appreciate the continuation of the upward trend.”

- Stocks popped Friday on the jobs data, but Capital Gains and Games blogger Andrew Samwick says the report merely represents “more of the same” for the labor market. “There is nothing in here that merits joy,” he writes. “Expect the spinmeisters to focus on the rise in private sector employment (up 763,000 since the low in December 2009) and the upward revisions (to smaller job losses) from the two prior months.”

- The positive vibe (at least for stocks) generated from nonfarm payrolls data can’t be sitting well with former labor secretary Robert Reich. “The Great Jobs Depression continues to worsen,” Reich writes on his blog. “The last time we saw anything on this scale was in the 1930s…The practical choice we face is this: Either major action to reverse the jobs emergency or years of intolerably high unemployment coupled with demagoguery and scapegoating.”

- August jobs report offers a “small sigh of relief,” but the big takeaway is the labor market remains essentially flat, Reuters blogger Felix Salmon says. “Flat, then, is the new up — which only goes to demonstrate just how worried the markets are about a double-dip recession,” he writes. “We’re not remotely in full-bore recovery mode yet.”

- August auto sales, released earlier this week, were portrayed as worst sales in 27 years. But that’s not best way to interpret the data, James Hamilton writes at Econbrowser. “The story for autos remains pretty much what it has been for some time — we’ve bounced off the bottom, but remain stuck at a point far below what would normally be expected. Double dip? Not here, not yet. Disappointingly sluggish growth? Very much so.”

- “The outlook for subpar growth and weak job creation — although superior to a new recession — is a real and present danger, and today’s employment report doesn’t offer much reason to dismiss the danger,” James Picerno writes at The Capital Spectator. “If the economy continues to struggle, eventually the risk of a recession will become more than a low-probability prediction.”

- Mark Thoma uses the central valley in California as a metaphor for economic recovery. “It’s narrow east to west, but very long north to south,” he notes at Economist’s View. “We went down into the valley as we went into the recession, and the question for me has always been whether we are heading east to west so that we will climb out of the valley relatively quickly, or north to south as we trudge along at the bottom of the valley for considerable time…The fact that we’ve had essentially no growth for a year now, and no hint of change any time soon, makes the north to south fear very real.”

- Barnes & Noble’s (BKS) battle with activist investor Ron Burkle is symbolic of a “big fish swallowing a small fish only to be itself swallowed by an even bigger one,” Josh Brown writes at The Reformed Broker. “Founder Len Riggio built the largest bookseller on earth by putting thousands of mom & pops under his sword across the country,” Brown notes. “Now he himself is facing his own possible destruction from the twin threats of shareholder activist Ron Burkle and the disintermediation of the digital age.”

- With Dell pulling out of the 3Par (PAR) bidding war, Robert Cyran wonders if Dell shareholders are on Xanax. Dell investors “displayed neither much concern about overpayment nor relief about the deal being dropped,” he says. “After a decade of scandals, missed opportunities and dismal performance, they may have stopped caring.”

- Just your typical brawl at the US Open.

Maybe this wasn't such a good idea after all.

One year after the government’s cash-for-clunkers mission juiced auto sales for a hot second, pundits still remain critical of the program.

A Boston Globe op-ed earlier this week by Jeff Jacoby calls cash for clunkers a “classic government folly.” He notes the used car market is still feeling the consequences from last year’s program. Used-car prices are way up, in part because supply is down and demand is high as a weak economy leads people to opt for a used car rather than splurge on a new one. That may be great for car salesmen, it’s not so hot for anybody looking to buy a car.

From Jacoby:

Congress and the Obama administration trumpeted Cash for Clunkers as a triumph — the president pronounced it “successful beyond anybody’s imagination.’’ Which it was, if you define success as getting people to take “free’’ money to make a purchase most of them are going to make anyway, while simultaneously wiping out productive assets that could provide value to many other consumers for years to come. By any rational standard, however, this program was sheer folly…

When all is said and done, Cash for Clunkers was a deplorable exercise in budgetary wastefulness, asset destruction, environmental irrelevance, and economic idiocy. Other than that, it was a screaming success.

The main critique of the program was that it failed to create additional demand. Instead, it pulled demand forward — so people who were thinking of buying a car in late 2009/early 2010, likely made the purchase a few months earlier knowing they could take advantage of the clunker program.

The idea sounded great at the time, but one year later, it’s unintended consequences are screaming loud and clear. And that makes it even harder to imagine that Obama last year pronounced clunkers “successful beyond anybody’s imagination.’’

Go figure.

US stocks rally again, extending equities’ winning streak, after August jobs report comes in better than feared.

DJIA jumps 128 (1.2%) to 10448, its fourth consecutive gain. Those gains, incidentally, almost totally wiped out August’s loss. S&P 500 rises 14 (1.3%) to 1105, surging sharply, but getting capped around the 100-day moving average. Nasdaq Comp gains 34 (1.5%) to 2234. NYSE volume at 3.5B shares traded is low, but that should be expected ahead of a the three-day Labor Day weekend.

It’s the best three-day showing to open a month since March 2009, a month that lives warmly in many a bull’s heart. Whether the rest of September will replicate March ’09 remains to be seen, but traders are going to at least have a nice holiday weekend to savor it.

Still, stocks haven’t broken out of their trading range, yet. The risk trade got a big boost this week, with a few data points coming in better than expected. Whether that’s a blip or some kind of near-term bottom is the question. In all the euphoria, the stock market almost completely ignored this morning’s ISM services index, which showed a rather distressing slide and on which John has a separate post.

Don’t forget, Mouseketeers, there’s a big difference between better than expected and good. This morning’s jobs report was not good. It was better than expected. The stock market may not care about that difference, but you should.

ISM services index? That come out today?

Peculiar that the stock market today so easily dismissed a worse-than-expected August ISM non-manufacturing report.

Not a big surprise that ISM services weakness is overshadowed by better-than-expected payrolls report, but the complete disregard for this stinker seems a little odd.  

After August ISM manufacturing’s upside surprise Wednesday, the Dow Industrials busted a 250-point move higher, with economists and other pundits quick to suggest the better-than-expected data should shelve any concerns about a double dip.

The fact that several regional manufacturing reports earlier in the month reported starkly different information was given little heed. “The contraction seen in some regional manufacturing surveys in August seems not to have been representative of the national manufacturing sector, as the ISM production index remains above-trend and the employment index was the highest since 1983,” Barclays Capital said this week.

Cut to today – the ISM services sector August gauge falls to 51.5 from 54.3, its lowest level since January and just a point and a half from slipping into contraction territory. The market flinched, juked and jived, but ultimately steadied and frolicked with the frisky euro again.

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Gluskin Sheff’s David Rosenberg breaks down the jobs report for you:

The jobs report was uninspiring in the aggregate but the bright spots cannot be readily dismissed. First, the private payroll number came in at +67,000, which was above the consensus estimate of +40,000, not to mention the ADP print of -10,000. This, along with the upward headline revisions of 123,000 and the 0.3% MoM gain in the wage number has the bulls rather excited.

But there were many other parts of the nonfarm report that left much to be desired. Here’s an unlucky seven examples of softness beneath the surface:

1. Aggregate hours worked were flat.

2. All the employment gains were part-time — full-time employment, as per the Household Survey, plunged 254,000.

3. Those working part-time for “economic reasons” surged 331,000 — the biggest increase in six months.

4. While private payrolls were better than expected, 10,000 of that +67,000 tally reflected returning construction workers who had been on strike.

5. Manufacturing employment was down 27,000 and total goods producing jobs were flat — hardly signs of a robust economic backdrop.

6. The diffusion index for private payrolls actually fell to 53.0 from 56.7 in July — a seven-month low. It was 68.0 at the April high, which is consistent with an economy slowing down to stall-speed.

7. The labour market gap widened with the all-inclusive U6 unemployment rate rising to a four-month high of 16.7% from 16.5% in July. This is why the odds are stacked against a sustained acceleration in wages.

Wish they'd do that census thing every year.

Yes, yes, I know, the jobs report was better than expected, not as bad as feared, a glimmer of hope, a kernel of confidence, a slash of color in an otherwise drab picture.

I’ll tell you what, I was prepared to make a point on this morning’s News Hub, a good point. But I’ll admit, the numbers were better than expected, they surprised me, too, and that was the story, and well, you know we get only a few minutes up there, so this point I wanted to make got pushed aside in my mind and I never brought it up.

It’s this: don’t lose sight of the bottom line.

Look, a net 54,000 jobs were lost in August. Yes, I know, the private sector created 67,000 jobs. But the Census Bureau let go 114,000 workers, temps hired specifically for the decennial poll. Still, the economy on balance shed jobs, and as far as growth goes, and consumer spending, and all those things, does it matter if the job lost was a public one or a private one? A temporary one or a permanent one? It just means that somebody, well, 114,000 somebodies, was getting a paycheck and now isn’t.

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So, that’s jobs report was “better than expected,” but was it actually good? No, but not as bad as feared seems to be enough for the market, for now.

I've been here a year, Jack; when do you think the jobs are coming?

Here’s your takeaway from the jobs report: The jobs market isn’t getting any worse. It isn’t getting any better either.

Nothing much changed in August for the nation’s work force, and nothing much has changed in the past year either. The Bureau of Labor Statistics reported 54,000 people lost their jobs in August, with 114,000 temporary Census Bureau workers coming to the end of that gig, while the private sector added 67,000 jobs.

Now, the stock market is reacting because the numbers were the proverbial “better than expected.” Consensus was for an overall slide of 110,000, with private sector adding 28,000 jobs. That’s all the market cares about, and seeing as it’s in rally mode anyway, it’s set to extend that rally.

This is such a middling report, it can probably be spun any way you’d want to spin it, so it’s best to try and look at the biggest picture possible. I’ll frame it this way: we’re eight months into 2010, and the economy has added a net total of 723,000 jobs. Job growth rose the first five months of the year, and has fallen the past three months. That averages out to 90,000 jobs a month, which is not even enough to keep up with population growth, forget starting to whittle down that 15 million-strong sea of unemployed people out there.

So this report is nothing to get all hot and bothered over, even though the stock market undoubtedly will.

There were some positives, let’s not kid ourselves. The revisions to July and June narrowed the losses in those months, which is a good thing. The number of people out of work for more than six months slipped to 42% from 45%; still a distressingly high number, but still a slight improvement.

However, the official unemployment rate edged up to 9.6%, and the broadest measure of unemployment, the U-6, rose to 16.7%. A year ago this time, the official rate was at 9.7% and the U-6 was at 16.8%, and haven’t changed dramatically during the entire time, so we’ve gone essentially nowhere in a year. If you believe the recession ended in July 2009, as so many do, then you’re talking about a year that was supposed to be a year of recovery for the economy. The jobs market didn’t get that memo.

“It will take many years before ‘full employment’ is re-attained,” Steven Wood of Insight Economics wrote. In August, there were 14.7M people unemployed (according to this table; in the actual release, BLS says it’s 14.9M); in August of 2009, there were 14.8M people unemployed.

Positive tone carries on for stocks around the globe as most Asian markets saw gains overnight and European markets are currently rising moderately.

US stock futures subdued premarket in anticipation of the August payrolls report, due at 8:30 a.m. ET. Economists look for the shedding of 110,000 jobs, mainly dismissed Census workers, offset perhaps by some anemic increase in private payrolls. Prior months’ revisions should be interesting, and curious to see if the labor force continues to contract, the key factor that’s kept the unemployment rate steady since the spring.

ISM August non-manufacturing index due at 10:00 a.m., and then look for the crowd to thin into the holiday weekend.

S&P futures down 1.60, DJ futures down 10. Ten-year note lower, yield at 2.64%.