Jobs report might snow investors
February's storms might have delayed start dates and hiring at some companies, making last month's employment figures less reliable.
By Sung Moss, TheStreet
The larger meaning of Friday's government jobs report may be buried under a few feet of snow.
The monthly nonfarm payrolls report, to be released by the Labor Department at 8:30 a.m. ET Friday, is known to set the economic tone for any given month. But economists and equity strategists are bewildered about what to expect for February, when several major snowstorms disrupted business across the country.
"It may show the jobs picture is worse than it actually is," said Art Hogan, chief market strategist at Jefferies, whose firm expects to see a loss of 122,000 jobs.
February’s storms, which shuttered offices and schools in the Northeast, may make last month's nonfarm payroll figures less reliable, reflecting a deeper-than-expected drop due to delayed hiring and start dates.
Most analysts are expecting some sustained jobs growth soon, but it probably didn’t happen in February. According to Briefing.com, many economists estimate that another 65,000 jobs were shed from nonfarm payrolls in February, while the unemployment rate probably edged higher to 9.8%.
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The jobs picture has taken on renewed importance in recent months as a sea of workers remain adrift in the unemployed ranks. The Labor Department said the nation lost another 20,000 jobs in January. But bulls were given something to cheer about as the unemployment rate dropped to 9.7%.
Bearish investors found more than enough ammunition in the report, too. The so-called "underemployment" rate, which includes part-timers seeking full-time work and discouraged workers who have stopped looking, remains high at 16.5%. More workers are also unemployed for longer periods, as the number of people unemployed for 27 weeks or more rose to 6.3 million. And the ranks of jobless minorities are vastly outpacing the broader population, with 16.5% of blacks and 12.6% of Hispanics counted among the unemployed.
The Senate attempted to respond last week by passing a $15 billion jobs stimulus package by a 70-28 vote. Republican Sen. Jim Bunning of Kentucky came under fire this week when he attempted to delay an extension on jobless benefits, only to relent under criticism.
Not all experts expect winter storms to impact the jobs number, but enough of them are worried.
"There's going to be a lot of noise in these upcoming data," said Larry Adam, U.S. chief investment strategist at Deutsche Bank (DB) Private Wealth Management. "So, I wouldn't overreact one way or the other. I think it's more important to look at it on a trend basis rather than a cycle basis. Our economist thinks we'll see a pretty good rebound in March on the idea the employment market is starting to recover."
The noise may also force market observers to put more focus on the unemployment rate, which is culled from a separate survey.
Regardless of Friday's numbers, there are some encouraging figures suggesting such a recovery. An assessment from Automatic Data Processing (ADP) showed private-sector employers shed their fewest jobs in two years, while a separate report from Challenger, Gray & Christmas said layoff announcements fell 41% last month.
In what Doug Roberts, chief investment strategist at ChannelCapitalResearch.com, says last week’s decline in initial jobless claims "bodes well for the numbers tomorrow." New claims for unemployment benefits fell by 29,000 to a seasonally adjusted 469,000 last week. Though first-time applications for state unemployment insurance have remained around 450,000 in recent weeks, they’re down from last year's highs of almost 700,000.
Firms are also improving productivity, doing more with less after slashing costs and employees, which could allow many companies to delay hiring. The Labor Department said worker output rose 6.9% in the fourth quarter at an annual rate.
Observers will dissect Friday’s report for clues on the economic recovery. Employment in the manufacturing industry showed positive growth for the first time in three years in January, so many will look for a trend in February's report. Others will be looking closely at temporary hiring figures, which some see as a precursor for future growth.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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