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Wall Street pros analyze the newest employment report and what it means for the U.S. economy now and down the road
By BW Staff
The February employment report, released Mar. 6, was not as bad as some on Wall Street had feared, but it was still pretty lousy. Nonfarm payrolls fell another 651,000 in February, while the unemployment rate jumped to 8.1% from 7.6%. The deep job losses point to protracted weakness in the U.S. labor market, with Standard & Poor's forecasting another 2 million job losses by fall.
Wall Street economists and analysts had plenty to say about the jobs report and other key topics on Mar. 6. Here's a sampling:
William Knapp, MainStay Investments
February payroll and unemployment data came in pretty much as anticipated. The Labor Dept. reported Friday in its Payroll Survey that the U.S. economy shed 651,000 jobs for the month. In the separate Household Survey, the unemployment rate rose half a percent, to 8.1%.
Revisions to January and December cropped an additional 161,000 jobs. Cumulative jobs lost since the current recession began in December 2007 stand at about 4.4 million, with much of that loss (2.6 million jobs) occurring in the past four months.
At 8.1%, the unemployment rate now exceeds the peak from the 1991 recession, 7.8% in June of 1992, and is at a 25-year high. During the recession of the early 1980s, the unemployment rate was greater than 8% for 26 months, from November 1981 through January 1984. From September 1982 through June of 1983 (10 months), the rate was greater than 10%, peaking at 10.8% in November and December of 1982.
Unemployment claims remain high, but did unexpectedly decline last week. For the week ending February 28, the seasonally adjusted initial claims for unemployment was 639,000, a decrease of 31,000 from the previous week's revised figure of 670,000, the Labor Dept. reported Thursday. The four-week moving average was 641,750, up 2,000 from last week.
John Ryding, Conrad DeQuadros, RDQ Economics
Horrendous! There can be no other word to describe this employment report. Adding in the revisions to December and January, there are more than 800,000 fewer jobs in February than were previously reported for January, while the unemployment rate is higher than at any time since December 1983. Unfortunately, the weekly jobless claims data suggest more of the same is coming for March. It appears that the economy is contracting at a 6% or so pace in the first quarter, following a 6.2% drop in the fourth quarter. It is unlikely to be long before we hear calls for more stimulus in Washington.
Michael Englund, Action Economics
Today's U.S. jobs report came remarkably close to a bulls-eye, though the markets traded upward as fear of a massive undershoot was unwound. The data were hardly "good news," however, as the numbers confirm that the rapid pace of labor market contraction evident through December and January extended into February as well, with a likely remaining round of weak reports for the month.
In short, though the Fed should remain as pessimistic as ever through the next two FOMC meetings, the official projections were already sufficiently dire to incorporate today's job market figures, which failed to provide evidence of weakness beyond what the market had already widely assumed.
Tony Crescenzi, Miller Tabak
The current quarter is likely to be the worst of the recession—the trough. For Wall Street, this lessens the importance of today's grim employment statistics. The case for a trough is fairly simple and based far more on fact than wishful thinking. This does not mean that it is time to commit significantly to riskier assets, but it is time to expect data to be less grim than they've been, and to watch the evolution of the data to judge whether and how the less-dire tone to the data might push investors to take on more risk. Today's employment statistics were not poor enough relative to estimates to shake out investors and lead to a capitulation worthy of buying, so most market trends are likely to persist. The notion of a trough would supersede that of a capitulation, if it develops.
Sam Stovall, Standard & Poor's
Why should anyone care if a stock is trading below $5 per share? First, many financial institutions are not allow to hold equities that trade below this threshold. As a result, these funds will jettison these issues once they fall below this level, and will avoid them until their stock prices move back above this threshold. As a result, these issues get pressured on the way down, and then lose out on "bottom-fishing" support until they float to the top again of their own volition. What's more, financial advisors are often, but not always, denied the ability to solicit the purchase of shares that trade below $5, again removing a second source of support.
It probably comes as no surprise that these issues are concentrated in the sectors that have been beaten up the most in the past year and a half. In the S&P 500, where 10% of the companies now trade below $5, a greater-than 10% concentration is found in the Consumer Discretionary, Financials, Information Technology, and Telecom Services sectors. In the S&P MidCap 400, again 10% of the members trade below $5, with double-digit sector concentration found in Consumer Discretionary, Energy, Industrials, Information Technology, Materials, and Telecom Services. Telecom was highest at 33%, while Tech was next largest at 15%. The Utilities sector was the only one with no sub-$5 constituents.