The stock market averted an outsized loss on Thursday, yet it was unable to avert a loss outright. The S&P 500 slipped 0.3%, marking its eighth decline in the last nine sessions and bringing its cumulative loss over that span to 8.1%.The catalysts for the stepped-up selling pressure have been well documented. In a nutshell, they all boil down to heightened concerns about a downshift in global economic growth at best and a relapse into recession at worst.
Those concerns have manifested themselves in lower stock prices and higher Treasury prices.
The run on the stock market by sellers and the run on the Treasury market by buyers is starting to engender a belief that each move is overextended and due for a reversion trade of some sort.
By the end of the day, we should have a line on whether that belief is more prominent than it now seems since the June employment report did not bring good news.
Private payrolls increased by 83,000 (Briefing.com consensus +100,000) while total nonfarm payrolls declined by 125,000 (Briefing.com consensus -130,000). The disparity is largely owed to a 225,000 decrease in the number of temporary employees working on Census 2010.
Granted the unemployment rate fell to 9.5% from 9.7%, yet that improvement belies the fact that the labor force participation rate dipped 0.3 to 64.7%.
The breakdown of private industry hiring was mixed. Professional and business services showed the largest gain (+46,000) while construction (-22,000) suffered the largest decline.
All in all, we are not inclined to view the June employment report as a favorable one.
While the payrolls numbers will get most of the early attention, the biggest disappointments in the report were the 0.1% decline in average hourly earnings (Briefing.com consensus +0.1%) and the reduction in the average workweek to 34.1 hours from 34.2 hours (Briefing.com consensus 34.2). The former is a negative as it relates to spending prospects while the latter is a marker contributing to the idea that the U.S. economy is slowing. For good measure, the manufacturing workweek decreased 0.5 hour to 40.0 hours.
There is still a big problem, too, with long-term unemployment. The number of people unemployed 27 weeks or longer accounted for 45.5% of unemployed persons. In June 2009, that percentage stood at 29.6%.
Separately, the so-called "real" unemployment rate, which accounts for discouraged workers not looking for jobs and marginally attached workers who are not counted in the labor force but want a job and can't find one, stands at 16.5%, which is where it stood in June 2009. In brief, this number suggests one out of six workers over the age of 16 is either unemployed or underemployed.The reaction in the futures market to the jobs report has been mixed. There was an initial spike and then a quick sell-off. Currently, the S&P futures are little changed and the market is expected to open relatively flat.
A disappointing employment report had presumably been factored into the market with the losses leading up to today. The report overall provides enough fuel to extend those losses, unless the reversion trade kicks in as some expect.
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