This morning’s data is likely to temper bullish investors heading into the jobs data on Friday. The Challenger Layoff report posted a sizable jump as layoff announcements spiked to 71,482 from 45,094 last month. We had been seeing steady improvement in the data over the last several months so this spike in new layoffs is unsettling for a market that is expecting job growth to return to the economy in the first quarter. The ADP employment report painted a similarly negative picture. ADP reported -22,000 for private payrolls.
The ISM services report came in below expectations at 50.5 vs an expected reading of 51. Return to growth is encouraging despite the small miss. The highlight in the data is the surge in new orders – something we also saw in Monday’s ISM manufacturing report. New orders jumped to 54.7 from last month’s reading of 52. The market appears to be overlooking the overall miss and pointing to the strong new orders figure as the most reliable leading indicator of future economic activity.
All in all this morning’s data was a bit of a mixed bag. We’re unlikely to see a blockbuster jobs number this Friday and that could actually be a good thing for equities as investors push back the inevitable rate increases. The weak jobs market remains a clear sign of the weak recovery, however.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.