Oct 6: On Jobs (BLS) and Jobs (Steve) – Economic Highlights

The overall tone in the market remains positive today as expectations build for Friday’s jobs numbers. This morning’s weekly Jobless Claims data was on the favorable side, though it did inch back up following the preceding week’s sharp fall. We also have central bank actions from Europe, with the European Central Bank leaving interest rates unchanged as expected and the Bank of England announcing a fresh quantitative easing program.

Weekly Jobless Claims rose 6K last week to 401K; the expectation was for claims to go up to around 411K. The prior week’s tally of 391K was modestly revised upwards to 395K. Jobless Claims had fallen sharply the week before to the lowest reading since April. But the drop was apparently a result of one-off technical factors, not fundamental improvements.

A major contributor to the preceding week’s sharp drop was a delayed impact of Hurricane Irene. Also, the survey period pertained to the last week of September and there are typically unusual swings in such end-of-quarter claim filings. Given this week-to-week swings in the series, it is useful to keep track of the relatively more stable four-week moving average, which fell by 4K last week to 414K.

Given these technical factors behind the prior-week’s sharp drop weekly jobless claims, the expectation was for a much bigger revision or rise in the claims. Since the revision and rise were much smaller than expected, this is an overall positive report even though the series has gone back above the 400K level. Other reports appear to be pointing towards some positive momentum on the labor market front as well, raising hopes that Friday’s non-farm payroll report from the Bureau of Labor Statistics (BLS) could bring a positive surprise.

Wednesday’s ADP report was decidedly positive, though the picture emerging from other key reports is relatively mixed. The employment component of the manufacturing ISM report for September showed a nice gain, meaning growth in manufacturing jobs. But the same reading from the service-sector ISM report showed a modest slippage.

Using the ADP report to handicap the BLS reading can get tricky, as the ADP report can be frustratingly off the mark on a month-to-month basis. It overshot by more than 70K in August and missed by about 40K in July. For September, the ADP shows job gains of 91K, which compares to current market expectation of about 90K private-sector jobs in Friday’s BLS report. Please keep in mind, however, that the government’s jobs tally last month was held down by about 45K due to the strike that month by Verizon (VZ) workers. A payback from that one-off shortfall in this Friday’s BLS report would mean September private-sector jobs north of 130K.

In corporate news, we have September same-store sales numbers from the retailers. JC Penney (JCP) came short of expectations, while Nordstrom (JWN) and Macy’s (M) did better than expected. The biggest news of the day, however, pertains to Steve Jobs, the co-founder and former CEO of Apple (AAPL).

The news is no doubt a sad reminder of the certainty of mortality, irrespective of one’s station in life. But few get to have as much impact as he did in his relatively short life. He was a truly transformational figure, leaving behind a legacy that will live on for a long time. Rest in peace, Mr. Jobs.