January Jobs Numbers
All About Jobs This Week
Earnings Preview 4/29/11
Saying that next week will be a busy one for earnings is a bit like Noah's observation that is "looks like we might get some rain." We are off to a good start on earnings season, but next week will probably be the most active. A total of 1,079 firms are due to report, including 115 from the S&P 500.
Of the 1079 firms reporting, 632 or 58.6% are expected to post higher EPS than a year ago. Among the S&P 500 firms, 62 or 53.9% are expected to show positive growth. The firms reporting next week include: Devon Energy (DVN), Emerson Electric (EMR), Kraft Foods (KFT), Kellogg's (K), Master Card (MA), Met Life (MET), Pfizer (PFE), Time Warner (TWX) and Visa (V).
It will also be a busy week for economic data. The focus will be on employment. The most important release of the week will be on Friday with the big April unemployment report. Prior to that we get appetizers like the ADP report. We will also get the ISM indexes, both Manufacturing and Services, as well as the first look at productivity and unit labor costs in the first quarter.
Monday
* The ISM manufacturing index is expected to slip from the very strong 61.2 level it hit last month. The consensus is looking for a reading of 59.7. As a "magic 50 index," that reading would mean that the manufacturing side of the economy is continuing to grow at a very strong pace. In addition to the overall index, pay close attention to how some of the key sub-indexes which cover production, new orders and employment are faring. Based on the reported regional mini-ISMs, the consensus looks about right to a touch optimistic.
* Auto and light truck sales probably remained close to the 13.1 million seasonally adjusted annual rate they posted in March, well over the under-10 million pace at the depths of the Great Recession, but a far cry from the 16 to 17 million annual rates that were the norm before the recession. It will be a very long time before we hit those levels again, but we will continue to see vehicle sales slowly recover. The supply chain disruptions (from Japan disaster) to auto production may have some effect sales in April, but may be more significant in May.
* Construction Spending fell by 1.4% in February. The consensus is looking for an unchanged level of spending in March. That seems a tad optimistic to me, but the decline will probably be smaller than last month.
Tuesday
* Nothing of particular significance.
Wednesday
* The ISM Services Index is expected to have stayed at its 57.3 March level. This is also a "magic 50" index, so we could see a decline and still indicate that the service side of the economy is still growing. A reading of 57.3 us still strong, indicating robust growth. As with the ISM manufacturing index, the behavior of the key sub-indexes of business activity, new orders and employment are at least as interesting as the overall level of the index.
* We get the appetizer for the employment report in the form of the ADP employment survey. The consensus is looking for ADP to report a gain of 200,000 private sector jobs, down slightly from the 201,000 it estimated in February (and the BLS level of 230,000 private sector). As the firm that actually cuts the checks of most companies payrolls, ADP is in an excellent position to gauge the strength of the job market. However, its numbers are often quite different than the private sector jobs numbers that are reported by the BLS on Friday. The BLS numbers do tend to be revised in the direction of the ADP numbers.
* Challenger Gray and Christmas, the big outplacement firm, will release its tabulation of large layoffs. They were down 38.6% year over year in March. I would expect a smaller decline in April, mostly due to a tougher comparison a year ago.
Thursday
* Weekly initial claims for unemployment insurance come out. They had a very nice decline early in the year, but have recently been bouncing higher again. Last week they rose by a very disappointing 25,000 to 429,000. A further rise from that level would be extremely disappointing, and the market would not like it at all. Fortunately, that is not expected to happen. The consensus is looking for initial claims to fall back to 300,000. A level of 400,000 seems pretty good compared to the experience of the last few years, but is right at the inflection point that has historically been the dividing line between strong and anemic job growth. After a huge downtrend from mid-April through the end of 2009, initial claims were locked in a tight "trading range" for most of 2010. We now appear to have broken out of that trading range to the downside. This could well indicate that the economy is about to start producing a significant number of new jobs. The four-week moving average (which smooths out the week-to-week noise) was over the 400,000 for the first time last weeks after being below it for seven weeks in a row.
* Continuing claims have also in a downtrend of late, but the road down has been bumpy. Last week they fell by 68,000 to 3.680 million. That is down 1.034 million from a year ago. I would expect a further decline this week. The consensus is looking for a level of 3.638 million. Some of the longer-term decline due to people simply exhausting their regular state benefits, which run out after 26 weeks. Those, however, don't last forever either. Federally paid extended claims fell by 76,000 to 4.165 million, and are down by 1.279 million over the last year. Looking at just the regular continuing claims numbers is a serious mistake. They only include a little over half of the unemployed now given the unprecedentedly high duration of unemployment figures. A better measure is the total number of people getting unemployment benefits -- currently at 8.187 million, which is down 113,000 from last week (there are some timing issues so the change in continuing and existing claims does not exactly match the change in the total). The total number of people getting benefits is now 2.323 million below year-ago levels. What is not known is how many people have left the extended claims via the road to prosperity, finding a new job, and how many have left on the road to poverty, having simply exhausted even the extended benefits. Given the differential between job growth and the decline in total people getting benefits, it looks like about 1 million people have simply run out of benefits, and have not found new work. Make sure to look at both sets of numbers! Many of the press reports will not, but we will here at Zacks.
* We get the first read on Productivity in the first quarter. Productivity, is, over the long term, one of the most important economic indicators there is. It is what ultimately determines the standard of living of a country. However, in the short term, raising output per hour is not an unmixed blessing when you have high rates of unemployment. Given the slowdown in overall economic growth, and the pick up in job creation in the first quarter, it seems clear that the rate of productivity increase will slow from the 2.6% rate in the fourth quarter. The consensus is looking for an increase of 1.0%.
* The productivity report will also provide data on unit labor costs. Those have been trending down of late as the benefit of productivity increases is accruing to capital (higher profits) rather than to labor (higher wages). The fall in unit labor costs and the high rate of productivity growth is one of the key reasons that net margins have been increasing so much of late (even among non-financial firms). The rise in net margins has been a key driver of earnings growth. In the fourth quarter net margins fell by 0.6%. The consensus is looking for them to rise by 0.8% in the first quarter. I suspect it will be lower than that, but still positive (which would be a negative from a corporate profitability point of view).
Friday
* The most important report of the week is the employment report. In February and March, payrolls finally started to show some real growth after two months of seriously disappointing. The economy added a total of 216,000 jobs in March, with 230,000 added in the private sector offset by the loss of 14,000 State and Local Government jobs. Growth should continue in March, but total payrolls will likely again be lower than private sector payrolls, as State and Local governments continue to lay people off to deal with their dismal fiscal situations. Consensus estimates expect total growth of about 183,000 in total and 200,000 on the private side. I think the total will be about where the consensus is, but with more from the private sector and more than the implied 17,000 government layoffs. Revisions to prior month's numbers will also be important, and in recent months they have been upward significantly. The unemployment rate is expected by the consensus to be unchanged from its 8.8% March level. Much of the change in the unemployment rate will depend on the civilian participation rate, was unchanged at 63.2% in February, but has been in a general downtrend. If it continues to decline, the unemployment rate will also decline. If the participation rate starts to rebound, as usually happens in a recovery, the unemployment rate will likely drift upwards. That would not really be all bad. The key measure will be the percentage of people who are actually working. That was at 58.5% in March from 58.4% in January. It is still extremely low by historical standards. The consensus is expecting the report to show that average hourly earnings increased 0.2% in April, after being unchanged in March. The average workweek is expected to be unchanged at 34.3 hours. Over all that adds up fairly solid report. Keep an eye on the duration of unemployment numbers which remain at historically very high levels.
* Consumer Credit (not including mortgage debt) is expected to have expanded by $5.0 billion, on top of a $7.6 billion increase in February. That would be the fifth rise in a row after a long, and highly unusual, string of declines as consumers have tried to repair their balance sheets. Most of the increase will probably come from non-revolving debt, such as car loans, rather than from increases in credit card debt.
Potential Positive or Negative Surprises
Historically the best indicators of firms likely to report positive surprises are a recent history of positive surprises and rising estimates going into the report. The Zacks Rank is also a good indicator of potential surprises. Similarly a recent history of earnings disappointments, cuts in the average estimate for the quarter in the month before the report is due and a poor Zacks Rank (#4 or #5) are often red flags pointing to a potential disappointing earnings report.
(In the Earnings Calendar below, $999.00 should be read as N.A.)
Potential Positive Surprises
AK Steel (AKS) is expected to report EPS of $0.01, down from $0.25 a year ago. Last time out, AKS posted a 22.2% positive surprise. Over the last month, analysts have raised their expectations for this quarter by 52.4%. AKS is a Zacks #1 Ranked stock.
Caterpillar (CAT) is expected to report EPS of $1.31, up from $0.50 a year ago. Last time out, CAT posted a 14.8% positive surprise. Over the last month, analysts have raised their expectations for this quarter by 4.09%. CAT is a Zacks #2 Ranked stock
MeadWestvaco (MWV) is expected to report EPS of $0.23, up from $0.11 a year ago. Last time out, MWV posted a 2.5% positive surprise. Over the last month, analysts have raised their expectations for this quarter by 7.17%. MWV is a Zacks #2 Ranked stock.
Potential Negative Surprises
Masco (MAS) is expected to report a loss of $0.03, vs. a loss of $0.02 a year ago. Last time out, MAS posted a 300% disappointment (loss when profit was expected). Over the last month, analysts have slashed their expectations for this quarter by 116.6%. MAS is a Zacks #5 Ranked stock.
Leggett (LEG) is expected to report EPS of $0.21, down from $0.27 a year ago. Last time out, LEG posted a 8.7% disappointment. Over the last month, analysts have cut their expectations for this quarter by 6.06%. LEG is a Zacks #4 Ranked stock.
MEMC Electronic Materials (WFR) is expected to report EPS of $0.12, up from a loss of $0.02 a year ago. Last time out, WFR posted a 21.9% disappointment. Over the last month, analysts have dropped their expectations for this quarter by 1.50%. WFR is a Zacks #5 Ranked stock.
About the Author
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service. For more information, visit http://www.zacks.com.
What is the jobless rate for April?
Has anyone noticed this?
Not only did the US economy add 290K jobs in April.... here's the hidden good news:
- Only 66K of those were from census hiring
- Manufacturing rose by 44K.... the largest increase since 1998.
- The unemployment rate went to 9.9% because 800,000 people re-joined the labor force who were previously discouraged to the point of giving up.
- January, February, and March numbers were all revised upward.... a total of 120K more jobs were created in those months than previously reported.
Jobs, jobs, jobs. Obamanomics... specifically, the stimulus.... is working.
You're wasting your time. The Fascists don't let the facts interfere with their lies, especially in a Bush caused economy..
January Jobs Numbers
March 2011 Jobs Report CNBC Stock Market Squawk Box
The Focus Is on Jobs
Earnings Preview 3/25/11
The fourth quarter earnings season is over, but now we are starting to get a few first quarter reports (and a few stragglers for the fourth quarter, many of which are ADRs). That makes for a very light overall earnings week.
A total of just 84 firms are due to report. Just five of those are members of the S&P 500, and all of the reports will be for February fiscal periods, which makes them part of the first quarter. The fourth quarter earnings season was a strong one, and this week should start to provide clues if that will be true for the first quarter as well. The firms reporting this week include: Apollo (APLO), Family Dollar (FDO), CarMax (KMX), Lennar (LEN) and McKesson (MKC).
While it will be a snoozer of a week on the earnings front, the same is not true for economic data. We start the week with Personal Income and Spending, and end it with the all-important employment report. Along the way we also get data on inflation, housing prices and the ISM manufacturing index. Along with the news from overseas, the economic data should be the main focus of the market next week.
Monday
* Personal Income is expected to have increased by 0.3% in February, down from a 1.0% increase in January. Personal Spending is expected to have increased by at 0.5%, up from a 0.2% increase January. The income figure was given a big boost last month by the effects of the cut in the Payroll tax, which will not be repeated. Of course, if spending is rising faster than income, it implies a fall in the savings rate. Over the short term that is a good thing, but in the longer term that is very bad news. In addition to the amount that Personal Income goes up, the data breaks out the sources of that income growth. Over the last few years far too much of that income growth has come from higher transfer payments from the government, and not from higher wages and salaries. That started to change a bit last month, and it would be nice to see more increases in paycheck income. Dividend income will probably rise nicely, but be offset by a fall in interest income due to the ultra-low interest rate environment we are in.
* The Personal Consumption Expenditure core deflator, a broad measure of inflation excluding food and energy prices is expected to have increased by 0.2% in February after rising 0.1% in January. This measure of inflation is closely watched by the Fed. If it comes in as expected, the Fed will remain comfortable keeping Fed Funds near zero and continuing with QE2. Inflation is not the major problem with the economy, high unemployment is.
Tuesday
* The Case-Schiller home price index showed a year-over-year decline of 2.38% in December, and the month-over-month changes in home prices, based on the composite 20 city index have been negative for the last six months. I would expect the downward slide in prices to continue and for the year-over-year change to fall further into negative territory based on the January data on existing home sales and inventories. The consensus is looking for a year-over-year decline of 3.3%, but that might be a bit optimistic. The Case-Schiller index is the gold standard for tracking housing prices, but we are talking about December data here (actually a three-month moving average of October, November and December data) so it tends to be on the stale side. Still, given that housing equity is the primary store of wealth for millions of people, changes in home prices are very significant. They also have a very significant bearing on how much worse the foreclosure situation is going to get. Housing has been the Achilles heel of this economy, and it is not likely to turn around as long as home prices are falling.
* The Consumer Confidence Index is likely to fall from its January reading of 70.4. The consensus is looking for a February reading of 65.0. This is basically a coincident indicator that tends to track unemployment and gasoline prices. I am not a big fan of this indicator, as what consumers say in these surveys does not always match what they actually do.
Wednesday
* We get the appetizer for the employment report in the form of the ADP employment survey. Last month, the ADP report was almost right on the money, but in the previous two months it was far too optimistic relative to the Friday BLS report. The consensus is looking for ADP to report a gain of 210,000 private sector jobs, down slightly from the 217,000 it estimated in February (and the BLS level of 222,000). As the firm that actually cuts the checks of most companies payrolls, ADP is in an excellent position to gauge the strength of the job market. However, its numbers are often quite different than the private sector jobs numbers that are reported by the BLS on Friday. The BLS numbers do tend to be revised in the direction of the ADP numbers.
* Challenger Gray and Christmas, the big outplacement firm will release its tabulation of large layoffs. They were up 20% year over year in January after several months of very sharp declines. I would expect a small decline in March.
Thursday
* Weekly initial claims for unemployment insurance come out. After being extremely erratic over the holidays, they have started to fall significantly, but are still bouncing around a bit. Last week they fell by 5,000 to 382,000. I would expect the downward trend in claims to continue next week. The consensus is looking for a minor increase to 383,000. A level of 382,000 seems pretty good compared to the experience of the last few years. After a huge downtrend from mid-April through the end of 2009, initial claims were locked in a tight "trading range" for most of 2010. We now appear to have broken out of that trading range to the downside. This could well indicate that the economy is about to start producing a significant number of new jobs. The four-week moving average (which smoothes out the week-to-week noise) was under the 400,000 for the fourth week in a row. Historically, that has been an inflection point at which the economy starts to add significant numbers of jobs.
* Continuing claims have also in a downtrend of late, but the road down has been bumpy. Last week they fell by 2,000 to 3.721 million. That is down 947,000 from a year ago. I would expect a further decline this week. The consensus is looking for a level of 3.700 million. Some of the longer-term decline due to people simply exhausting their regular state benefits which run out after 26 weeks. Those, however, don't last forever either. Federally paid extended claims fell by 12,500 to 4.345 million, and are down by 1.516 million over the last year. Looking at just the regular continuing claims numbers is a serious mistake. They only include a little over half of the unemployed now given the unprecedentedly high duration of unemployment figures. A better measure is the total number of people getting unemployment benefits, currently at 8.766 million, which is down 187,000,000 from last week (there are some timing issues so the change in continuing and existing claims does not exactly match the change in the total). The total number of people getting benefits is now 2.550 million below year-ago levels. What is not known is how many people have left the extended claims via the road to prosperity, finding a new job, and how many have left on the road to poverty, having simply exhausted even the extended benefits. Make sure to look at both sets of numbers! Many of the press reports will not, but we will here at Zacks.
* The Chicago Purchasing Managers Index is expected to dip slightly to 69.5 from 71.2 last month. This is a regional "mini ISM." Like the ISM, any number over 50 indicates expansion, so we are still talking about pretty robust growth, just a bit slower than last month though. Not that significant in and of itself, but it might give a heads up on the ISM number, particularly if there is a big change in it.
Friday
* The most important report of the week is the employment report. In February, payrolls finally started to show some real growth after two months of seriously disappointing. The economy added a total of 192,000 jobs, with 222,000 added in the private sector offset by the loss of 30,000 State and Local Government jobs. Growth should continue in March, but total payrolls will likely again be lower than private sector payrolls, as State and Local governments continue to lay people off to deal with their dismal fiscal situations. Consensus estimates expect total growth of about 185,000 in total and 203,000 on the private side. Revisions to prior month's numbers will also be important, and in recent months they have been upward significantly. The unemployment rate is expected by the consensus to be unchanged from its 8.9% February level. Much of the change in the unemployment rate will depend on the civilian participation rate, was unchanged at 63.2% in February, but has been in a general downtrend. If it continues to decline, the unemployment rate will also decline. If the participation rate starts to rebound, as usually happens in a recovery, the unemployment rate will likely shoot upwards. That would not really be all bad. The key measure will be the percentage of people who are actually working. That was also unchanged at 58.4% in February from 58.3% in January. It is still extremely low by historical standards. The consensus is expecting the report to show that average hourly earnings increased 0.2% in March, after being unchanged in February. The average workweek is expected to tick up to 34.3 hours from 34.2 hours. Over all that adds up fairly solid report. Keep an eye on the duration of unemployment numbers which remain at historically very high levels.
* The ISM manufacturing index is expected remain at the very healthy 61.4 level it hit last month. As a "magic 50" index, that reading would mean that the manufacturing side of the economy is continuing to grow at a very strong pace. In addition to the overall index, pay close attention to how some of the key sub-indexes which cover production, new orders and employment are faring, all of which were above 60 in February, and several were at multi-decade highs.
* Construction Spending fell by 0.7% in January. The consensus is looking for another decline of 0.6% for February. Look for possible revisions to the December number, as well.
* Auto and light truck sales probably continued to accelerate from the 12.7 million seasonally adjusted annual rate they posted in January, that is well over the under 10 million pace at the depths of the Great Recession, but a far cry from the 16 to 17 million annual rates that were the norm before the recession. It will be a very long time before we hit those levels again, but we will continue to see vehicle sales slowly recover. The supply chain disruptions to auto production may affect sales in April, but should not have much effect on the March numbers.
About the Author
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service. For more information, visit http://www.zacks.com.