Despite the anxiety around the June employment report Friday, traders say the market's reaction could be muted.
The Dow Wednesday rose 57, to 8504, and the S&P 500 was 4 points higher at 923. There were sellers in the long end of the bond market, with 10-year yields rising slightly to 4.330 percent. The dollar fell 0.8 percent against the euro, to $1.4142 but gained 0.3 percent against the yen. Metals moved higher but oil slid.
From Fast Money
Stock market volume was extremely light Wednesday, and traders see the same for Thursday, even with the action around the jobs report. The market is closed Friday for the fourth of July holiday, and traders predict few participants will be in the market Thursday afternoon. The bond market closes early.
Economists expect nonfarm payroll losses of about 365,000 and an unemployment rate of 9.6 percent, when the June jobs report is released at 8:30 a.m. Also reported Thursday are weekly unemployment claims, at 8:30 a.m., and factory orders, at 10 a.m. The European Central Bank holds a rates meeting and a briefing ahead of the New York open.
"The payroll number is a real craps shoot," said Stephen Stanley, chief U.S. economist at RBS. "Last month's number was so much of an improvement relative to what everyone was expecting." May's report of 345,000 job losses was a shocker, well below Wall Street estimates, and economists will be looking to see that number confirmed. "Our feeling was it was a little too much, too soon," said Stanley.
Deutsche Bank chief U.S. economist Joseph LaVorgna expects the pace of job losses to slow to 325,000. "The losses are so large it can't continue. We are significantly worse than where we were in either the '74 or '81 recessions, in terms of cumulative job losses. In the average recession, you lose about two percent peak to trough. We're down roughly 4 percent peak to trough right now," he said. He said he expects the June report to show hours worked declining.
LaVorgna said he expects an unemployment rate of 9.6 percent, but said the number could grow to 10 percent sooner than expected. "We're climbing a mountain. You don't really see where you're going until you're over it," he said.
"The good news is things are better than people thought they were going to be three months ago, but I don't think they're that much better," he said.
LaVorgna said the jobless claims could actually prove to be the more important number. "If the claims number does something, for whatever reason ... it falls by a lot or increases by a lot, and the pattern is followed in the continuing claims number, that might dilute the effect of the jobs report," he said. He expects to see 610,000 in claims.
Ray of Hope
The National Federation of Independent Business said Wednesday it appears the jobless rate may have peaked. Its June survey showed a decline in average employment per firm of 0.8 workers over the last three months, much smaller than the May decline.
The NFIB, which represents small businesses, said job creation is not occurring, but job destruction is slowing. Job opening and job creation statistics show the unemployment rate falling to 8.8 percent over the next three months.
The NFIB also said 11 percent of the 400,000 employers it surveyed reported unfilled job openings, up two points form May. The NFIB said 10 percent of the employers plan to create new jobs, while 10 percent plan to reduce employment over the next three months. It said job creation plans were negative in all industry groups except for manufacturing and construction. Also, job creation plans in the east south central states were very negative, while the west south central and Pacific states were "solidly positive."
Like a number of economists, Stanley expects the third quarter to show positive growth. "We'll see a very small positive, around 1 percent," he said.
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"The violent nature of the inventory liquidation in the beginning of the year -- I think a lot of that is behind us for now," he said. "They are starting to get inventories under control ... in the second half, the ground work is being laid for stabilization and eventually maybe a bit of an upturn in output."