Employment Stocks Signal More Trouble Ahead, Says Dr. Joe Duarte
Duarte added: The market is starting to worry about the employment report, which is valid given the numbers put forth by the private employment surveys released yesterday which delivered near 700,000 job losses for January by one account and rising layoffs by another. Yet, one employment survey, the Moster Employment Index showed improvement.
To be sure, it seems foolish to expect a positive surprise on Friday's employment report, as there are no indications that we can find that suggest such an event is likely. According to the Fed's Beige Book, released Tuesday afternoon, with rising layoffs and hiring freezes, unemployment has risen in all areas, reducing or eliminating upward wage pressures. A number of reports pointed to outright reductions in hourly compensation costs, through wage reductions and reduction or elimination of some employment benefits.
The February ISM Index (Purchasing Manager's report) fell to 26.1 from January's 29.9, and is contracting at a faster rate, which means that by that measure, the rate of job losses is accelerating.
According to the ISM report, no industry sector that it tracks showed an increase in employment and this is the seventh consecutive month of decline in employment. An Employment Index above 49.7 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment, which means that this index will have to nearly double before the government's employment report will start to show growth in jobs.
So what's going on with the Moster Employment Index, and what is it telling us? According to the Monster press release, online job opportunities in all but three industry sectors rebounded in February with utilities registering the largest monthly gain. Administrative/ Support /Waste Management/Remediation Services staged a partial rebound from the record low online recruitment levels of January. In fact, Monster says that a bounce in its index for the month of February is a pattern, and that this year's bounce is weaker than previous bounces reflecting the dramatic fall in demand for business support and facilities-related services as companies look to save costs amid the current economic climate.
The consensus forecast for Friday's report is for a loss of 650,000 jobs, but the ADP Employment Survey delivered news of 695,000 jobs losses on Wednesday.
Duarte's conclusion: The employment report, barring some kind of miracle, is going to be a doozy. There may be more losses than expected by the surveys, and that could be a shock that the market may or may not be set up for. That means that Friday could be another memorable day.
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Duarte's IntelligentForecasts.com (http://www.intelligentforecasts.com) provides free news coverage and analysis, and his daily articles and news summaries offer recommendations and analysis for ETFs, and individual stocks in the technology, health and biotechnology, and energy sectors. Duarte has combined expertise in health care, energy, and the effects of politics and global intelligence on the financial markets offer a unique blend of insight and information to thousands of active investors and political and intelligence aficionados around the world on a daily basis.
He is the author of: Futures And Options For Dummies, Successful Energy Sector Investing, Successful Biotech Investing and co-author of After-Hours Trading Made Easy. In early 2001, in Successful Energy Sector Investing, he correctly predicted that Venezuela's political problems could lead to an energy crisis in the United States. He has also appeared as a weekly guest on Market Mavens Radio and has logged appearances on KNX radio in Los Angeles, Financial Sense.com radio, and Wall Street Radio.
One of CNBC's original Market Mavens, Dr. Duarte has been writing about the financial markets since 1990. His articles and commentary have been featured on CBS Marketwatch, Barron's, Smart Money, Medical Economics, and in Technical Analysis of Stocks and Commodities magazines. In 2003, Doctor Duarte received second place, in the professional section, of the Medical Economics Investment Challenge with a 12-month return of 42%.
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