Can the Employment Report Save the Day?

August 4, 2011 4:59 pm

The carnage certainly does not seem to be over and the VIX is higher than the last dip on March 17th, 2011.  It appears that investors may be waking up to the notion that we still have problems in the economy despite corporate earnings strength.  Let’s recap some of the issues then we will look at a preview of the employment data that could save our bacon tomorrow.

Unemployment Claims:

At 17 Weeks above 400,000 of initial jobless claims, it is not surprising that the unemployment rate has not been moving in a positive direction.  Last week we were extremely happy that we had broken that record just to find out this week that an adjustment to the number pushed it above 400k.

Currency Devaluations:

As it currently stands the United States holds a “Strong Dollar” policy.  Whether you believe it or not, we at least have not taken any “purposeful” stance to devalue the currency.  However, much of our corporate profits have been due to a weak dollar.  Multi-Nationals have long enjoyed increased revenue as foreign countries purchase US goods for a discount.  Now that we are beginning to see some countries including Switzerland and Japan intentionally devaluing their currencies, we could see a shift in this trend.  This will surely not end up good for US based companies.

Employment Report

Now to the saving grace that could help boost our markets to avert a total disaster this week.  The employment report is due out at 8:30am EST and will be the determinant of a bounce or continued pressure.  It appears the markets have already priced in a pretty weak number.  This is despite the fact that we saw decent data from the ADP Payroll report.  After last months differential in the ADP vs. BLS reports, it seems investors are discounting the ADP report substantially.

All though not likely, we could be in for a nice surprise tomorrow.  The reason we say not likely is because unknown government intervention and regulation has stunted any kind of hiring.  Analysts across the spectrum are also expecting a low number.  Most of the major players such as Goldman, JP Morgan, Barclays and Deutsche Bank are looking for a number lower than the current expectations of 85k.

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