Trader Talk

Friday's Jobs Report—How Low Are Expectations?

How low are expectations for Friday's jobs report? There's a joke going around trading desks: "The nonfarm payroll report will be so bad that it can given out by name, not by number: 'Mr. Smith got a job.'"

OK, so expectations are low. Really low. But that's good. Consensus is somewhere around 80,000 new jobs but whisper numbers are well below 50,000. Those numbers have fluctuated wildly in the past months, but the trajectory has been steadily down: from 235,000 in February to 18,000 in June.

Markets are now reflecting this. The sectors that are weakest since the recent downturn 8 days ago are industrials, transports, and materials.

Since July 21:

- S&P Industrials down 9.7%

- Dow Transports down 8.5%

- S&P Materials down 7.4%

- S&P 500 down 5.8%

With the global outlook for growth coming down, it sure looks like we need more global coordination. The Big Four global powers (China, the EU, the U.S. and Standard and Poor's — ahem) will all have to get on the same page. What's that mean?

John Maynard Keynes, phone home: the traditional response is that there is not enough money in the system. It needs to reliquify.

This will argue for more stimulus. We are coming up on the one year anniversary of Jackson Hole, where Mr. Bernanke inaugurated QE2, the second round of quantitative easing. There is the opportunity.

Yes, I know, there is no appetite for this. No one wants to do it. QE2 only pumped up stocks and commodities, not the economy.

But let me ask: do you think Washington is going to sit there and do nothing if these numbers keep up? Bernanke has already told you he is not the Federal Reserve Board of 1930 — the one that did nothing, that let the sun sink on the 1930s.

And President Obama — you don't think there is something around job creation coming? Repatriation of overseas profits tied to job hiring, something?

And the Congress? Some Tea Party members may not care if they are re-elected in 2012, but I assure you others do. Something will be forthcoming. Hopefully it will be tied to something constructive, like an overhaul of the tax structure. We should be so lucky.


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