Friday, November 4, 2011

Stocks Drop Initially on Poor Employment Data, Recover Late; G20 Soothes Nerves

Friday was a fitting end of the week for stocks, a the BLS released some very sketchy employment data that sent investors initially to the sell windows, shedding stocks that have run up nicely over the past two sessions.

The week included two rather large down days followed by a pair of higher sessions and Friday's slight sell-off. The Labor Department reported that the US gained 80,000 jobs in its monthly non-farm payroll release, 104,000 of which came from the private sector, offset by 24,000 government job losses.

There were a number of revisions - all upward - to September and August data. September non-farm private payrolls, originally pegged at 137,000 job gains, was revised to 191,000. August, originally reported at a flat zero, was revised for a second time, adding in another 57,000 job gain, following last month's 47,000 upward revision, making August a much better month for employment - if one is inclined to believe government data, of which everyone is not - at a net jobs gain of 107,000.

Disappointing results at the outset sent stocks to their lows of the day in early trading, but as traders digested the data, found some reason for optimism, mostly in the revisions, and, though October's gains were not enough to keep pace with natural labor force growth (roughly 125,000 a month is needed), another positive month, on top of other positive economic data, was enough to erase those losses as the session wore on.

Catching up on other data releases, third quarter productivity increased by an estimated 3.1% after two consecutive quarterly declines.

Factory orders increased by 0.3% in October, on expectations of -0.5%, and the ISM services index inched lower, to 52.9, from 53.0 in September.

The official unemployment rate was pegged at 9.0, down from 9.1 in September, though most of the decline was due to job seekers falling off unemployment roles rather than finding new employment.

Another factor in the calculation of the overall strength or weakness of the US labor market comes in the form of the BLS' notorious birth/death adjustment, which measures the number of businesses closing and shedding jobs (death) and new business start-ups adding jobs (birth). According to this arcane, rather sloppy assessment, the BLS concludes that 103,000 more jobs were created in October by new businesses than were destroyed by business closures. In other words, almost all of the private sector job gains in October were statistically generated, which is why there is some doubt to the veracity and reliability of government statistics.

In Cannes, France, leaders of the G20 nations concluded a meeting without offering any new IMF funds to help Europe deal with its lengthy debt crisis. The fact that the member nations effectively told Europe to "fix it yourself" was less of a surprise than the IMF putting Italy under monitoring of its pension, privatization and labor reforms, long overdue.

That the leading economic powers of the world would defer to next year a decision on whether Europe needed additional help could be viewed as a positive development, especially after the referendum in Greece on that country's bailout money was effectively shut down on Thursday.

For the week, the Dow lost 248 points, the NASDAQ shed 51 points and the S&P dropped 32 points.

Dow 11,983.24, -61.23 (0.51%)
NASDAQ 2,686.15, -11.82 (0.44%)
S&P 500 1,253.23, -7.92 (0.63%)
NYSE Composite 7,552.23, -52.91 (0.70%)
NASDAQ Volume 1,959,105,000.00
NYSE Volume 3,947,110,000
Combined NYSE & NASDAQ Advance - Decline: 2093-2430
Combined NYSE & NASDAQ New highs - New lows: 73-59
WTI crude oil: 94.43, +0.17
Gold: 1,756.10, -9.00
Silver: 34.08, -0.41

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