>> you are really going to have to 'splain this one to me
Hi Liz. The explanation is in the high productivity number.
Large companies (who make the establishment survey) have been cutting labor for 3 years now. They have reduced staff to lower their break-even point so they can survive an indefinite recession. However, they still retained excess capacity, to respond to the expected up-turn in demand.
Well, the increased demand has arrived. As evidenced by the increase in GDP. And companies could fill it from inventories and from existing labor and capital. That's what higher productivity means. More goods for same labor. The only way this could happen is if factories had spare labor that they've kept on hand even though they weren't fully employed.
But this spare capacity can only go so far. It was actually expected to be exhausted in August. But apparently it wasn't totally. So there was not an increase in hiring. As far as I know, the number of employees increased in the raw data, but the seasonal adjustment made it negative.
Anyway, the number of lost jobs was small. Along with the depletion of inventories, increase in retail sales, lower dollar, tax rebates, huge gov spending, etc..., I expect the jobs created number to swing to a small positive in the next report.
And the double positive will be that the positive jobs report will follow the end of "warnings period" which I expect to come and go without much in the way of negative warnings.
Actually the response to the labor report was positive when the market opened on Friday. But by the close, weekend-risk-aversion had asserted itself, and people took profits at high prices (12 month high for many stocks).
Assuming nothing exceptionally disturbing gets said tomorrow night, the rally should resume on Monday.
Sarmad |
