Given that this is the July 4th holiday week, and Independence Day occurred smack in the middle of the week, trading in the stock market has been light. Many people appear to be on vacation, or at least taking a few extra days off. As much as there have been some economic reports, reaction in the markets has been subdued. Additionally, it seems that most investors have been keeping their eyes on Friday’s National Unemployment Report before doing any real investing.
8:30AM Friday the Labor Department announced that the unemployment rate remained unchanged at 8.2%. This report was in line with most predictions. The concerning part of the report is that only 84,000 private sector jobs were created. This number is lower than expected and further indicates that employers are not expanding their workforces as much as many would hope.
Non-farm payroll employment in May rose only 69,000, following increases of 77,000 in April and 143,000 in March. The addition of 84,000 jobs in June indicates that we are a long ways away from job recovery and that the trend of hiring mains virtually flat.
As a point of interest, if you have been reading this newsletter for a few months, you know that I find the need to compare the actual National Unemployment Report with ADP’s Payroll Report. ADP has such a poor track record of predicting unemployment that one will question if they are doing this with their eyes closed.
For the month of June, ADP once again proved that they are clueless in predicting employment numbers. ADP estimated an increase of 136,000 jobs, whereas the actual number was only 84,000. For what has pretty much become a normal monthly occurrence, ADP, a payroll company, is way off the mark. (I am trying to figure out that if I was wrong 10 out of 12 times making predictions in a business that I am supposed to be an expert in, what my clients would think of me.)
At the opening bell, investors indicated their displeasure with the jobs report. Within 2 minutes of trading on Friday the DOW plummeted more than 120 points as investors pulled money from stocks and placed them into the safe haven of government bonds.
Outside of Friday’s labor report, we saw a drop of First Time Jobless Claims of 14,000 in the June 30 week to 374,000. The figure is well under expectations for 386,000, however 374,000 is still not a number that should be celebrated as it is still hovering at a level that does not support economic recovery.
On the housing front, not much to report this week, however what little news there was, it was positive. Construction appears to be picking up steam. Construction spending jumped 0.9 percent in May, following a 0.6 percent gain in April. The consensus was for a 0.2 percent increase for May.
The increase in May was led by private residential spending which rose 3.0 percent after a 1.7 percent rise in April. Although the new multifamily area showed the greatest strength, new single-family spending was notably positive. Compared to a year ago, overall construction is up 7.0 percent in May.
Next week’s economic reports are:
- Wednesday July 11th – FOMC Minutes
- Thursday July 12th - First Time Jobless Claims
- Friday July 13th – Producer Price Index and Consumer Sentiment
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