Market Talk

It occurred to me this week that there’e less anticipation for today’s jobs report than there’s been in some time. It just feels different, and what’s different is this: nobody’s looking for the turning point anymore.

We’re a year and a half into the “recovery” phase, and apart from a few months last spring when the gains were strong, every single payrolls report has shown, let’s just say it once again, a jobs market that is stagnant.

The argument was that jobs are a lagging indicator, that once the recession was over, jobs would eventually come back, too. There was anticipation that the rebound in corporate profits would lead to a rebound in hiring; some people even went so far as to suggest that companies would have to hire rapidly, that they’d fired too many people during the recession, the “panicked” excuse.

Nobody feels that way anymore. Nobody’s hotly waiting to declare the “turning point.” Now, it seems like we all realize we’re just going to have to bear this thing out until we don’t anymore. If you’re a Wall Street analyst, it’s just a data point. If you’re a trader, it’s just a trading opportunity. If you’re unemployed, however, it’s reality. Slogging reality.

So while we still hope that today’s report has the proverbial upside surprise to it, and heralds the job market’s true turning point, we’re not counting on it. Not anymore.

It’ll get here when it gets here. Whenever that is.

Addendum: More than the actual number for today, more than the details, the most important part of today’s report will be the benchmark revisions for the past year, which the BLS does annually. Was the jobs market stronger or weaker than we thought? That will be the real tell, and will give you an idea of where we’re heading for the upcoming year.

(Photo: Library of Congress)

We see where, once again, the weekly jobless claims have fallen…after rising the week before…and falling the week before that…and rising the week before that.

I’m seriously starting to think this particular data point is telling us very little about the jobs market and the economy right now. Apart from that brief dip below the 400,000 level in December, this reading has been stagnant for more than a year. We know, too, that while companies are still trimming staff, the worst of the layoff storm is over.

What matters now, and I think it was Dan Greenhaus over at Miller Tabak who I saw first make this point, is the rate of hiring, not firing. On that front, we’ll get the big national, nonfarm payrolls report from the BLS tomorrow. The spin is sure to be pretty, but unless this thing explodes, it’s going to show exactly what the weekly claims are showing: the jobs market is stagnant.

The latest Dow Jones survey of economists has the consensus job growth number at 136,000, with the unemployment rating inching up to 9.5%. That’s barely enough to keep up with population growth, to say absolutely nothing of the 8 million jobs that disappeared in the recession (1.1 million of them were recovered last year,) or the jobs that need to be created but aren’t in order to get the economy back to a more sustainable, stronger position.

“Job loss,” Rebecca Thiess at the Economic Policy Institute wrote, “is only half the labor market story.” It’s not just the jobs lost; it’s also the jobs that needed to be created to keep unemployment stable, but weren’t.

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Some choice tidbits from Gluskin Sheff’s David Rosenberg on this morning’s jobs report. The first two sentences really say it all, but if that only wets your whistle, we’ll lay a few rounds out for you.

This is no time to mince words. The U.S. labour market is in horrible shape. In fact, considering that policy rates are at zero, the Fed’s balance sheet has tripled in size (with more to come), and a 10% deficit-to-GDP ratio that would have even made FDR blush, the unemployment situation is an unmitigated disaster that deserves the government’s undivided attention. Instead of providing zero-percent mortgage financing to unemployed workers, which is only going to make them more vulnerable to credit conditions in the future, why not instead create conditions that will allow the economy to nurture a sustained pace of job creation. This may mean reducing the cloud of uncertainty overhanging the small business sector, including a second look at how the health care reforms are impeding employment growth, not to mention other supply-side measures such as payroll tax relief for the broad corporate sector.

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- Hewlett-Packard’s (HPQ) suit against former CEO Mark Hurd looks “very much like it was filed in a fit of passion after hearing that Hurd had signed on with Oracle,” Reuters blogger Felix Salmon says. “There’s no tactical or strategic rationale for this: it’s just petulance, really.”

- “Hurd’s knowledge of H-P’s server and data storage-systems business will undoubtedly come in handy at Oracle, which has been aggressively moving into that very space ever since its acquisition of Sun,” Digital Daily blogger John Paczkowski says. “In that sense, Hurd’s hiring is a real coup for Oracle. Who better to put the screws to a rival than a former CEO with a bone to pick?”

- There are currently 161 potential IPOs on file that are hoping to raise $56B. Staggering numbers but, as Josh Brown points out at The Reformed Broker, not necessarily as great as they appear. “Between LBO retreads and the previously bankrupt, it remains difficult to get excited about the initial public offering dealflow, robust as the pipeline seems to be in dollar terms on the surface.”

- Former OMB Director Peter Orszag makes his debut as a columnist for the New York Times by advocating an extension of the Bush-era tax cuts for two years for the middle class, and even for the upper class if that’s what’s needed to get a bill through Congress. “Higher taxes now would crimp consumer spending, further depressing the already inadequate demand.”

- The labor force had little to celebrate this Labor Day, Robert Reich says. Organized labor is down, and non-organzed labor is facing joblessness and underemployment. “Face it: The national economy isn’t escaping the gravitational pull of the Great Recession.”

- If the market has been overly bearish lately, paving the way for relief rallies and such, it’s not really showing. John Hussman notes the VIX, which remains in relatively placid territory. “It’s difficult to look at the evidence and conclude that investors are excessively bearish, much less terrified here.”

- FCIC hearings revealed how reliant Lehman was on daily, short-term funding to cover longer-term costs. “It was a recipe for disaster, a trailer park in search of a tornado,” Barry Ritholtz writes at The Big Picture.

- “The truth is that the trouble in housing is not, for the most part, a demand-side issue,” Ryan Avent writes. “The problem is the millions of homeowners stuck in houses they can’t afford to sell. These households represent a significant shadow supply of foreclosures-in-waiting. I agree that it would be silly for the administration to try to support housing prices by offering more goodies to potential homebuyers. But it doesn’t follow that letting prices go their own way will magically get housing markets moving again.”

- “Newspaper advertising revenues are on track this year to dive to a 25-year low of approximately $26.5 billion, or 47% of the record $49.4 billon in sales achieved by the industry as recently as 2005,” Alan Mutter notes.

- What’s up with Google’s logo today?

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.

You’d think that with the jobs market on the mend, as they say, that the nation’s big publicly traded staffing firms would be going gangbusters. But staffing companies are caught at the same point as the jobs market itself, not in free fall anymore, but not really that strong either. From today’s Upshot:

Results from job-staffing and services companies indicate healing in the labor market, but a rebound based on new job creation remains in the future.

The pace of improvement “is a little uneven, it’s more measured than we would like,” said Robert Half International Inc. Finance Chief Keith Waddell on Tuesday. Robert Half’s first-quarter revenue fell 10% to $737 million, while net income eased about 3% to $8.5 million.

Staffing companies are at the heart of the biggest question surrounding the economy: the health of the job market. Judging by results of companies including Robert Half, Manpower Inc. and Heidrick & Struggles International Inc., there is no momentum in the labor market.

To be honest, we took the tone we took because we were surprised to find that the staffing companies not doing better. We expected they’d show some fairly gangbuster results, given that temp has been the one bright spot for the jobs market.

But Heidrick & Struggles posted a 1Q loss Tuesday that missed Street views, and investors pounded the stock, sending it down 9.5%. Robert Half posted first-quarter results on Wednesday that were also deemed unsatisfactory by the Street, and investors drove the shares down 10%. The market clearly expected more from those guys.

We don’t want to make too much out of it, well, more than a column in any case, but it’s interesting nonetheless.

Today in The Upshot, we take a look at what companies are saying about demand, how strong it is, and how they see it panning out in 2010.

Profit growth has returned to corporate America, but for it to stick around, demand from consumers and businesses needs to strengthen from current levels.

From Alcoa Inc., which helped kick off fourth-quarter earnings reports, to Black & Decker Corp. last week, executives say demand remains subdued. A few companies, notably Cisco Systems Inc., are forecasting revenue gains. But for every Cisco, there are companies across a swath of industries that aren’t confident in the timing of any sales rebound.

The bottom line, to us, was that most companies are taking a very cautious stance toward the kind of demand they’re seeing for their products. That’s going to have an effect on how much hiring they do this year, because they will hire new staff only to meet rising demand.

For one thing, companies have a tremendous resource in the fact they they’ve cut hours for existing staffers so sharply, they could add the equivalent of 2.5 million employees back just by increasing hours before ever having to hire a soul, according to Heidi Shierholz at the Economic Policy Institute (Joan McCullough over at East Shore Partners alerted us to the report.)

So it’s going to be a long time, a very, very long time, before that high unemployment rate gets whittled down to anything resembling a decent jobs market.