Jobs Report: Confirm Or Derail Rally

They say less is more. So if Friday’s jobs number shows less of a decline will the stock market make more gains?

Economists widely believe that the latest figures from the Labor Department released Friday morning will show employers cut 520,000 jobs last month after reducing payrolls by 539,000 in April.

If they’re right, the results will be the smallest number of jobs cut since October and could suggest to investors that the recession is starting to ease.

However with the good comes some bad. Economists expect the unemployment rate to rise to 9.2 percent in May, the highest since September 1983.

"It's still a very weak labor market out there. Businesses are reluctant to hire and continue to lay people off to control costs and bring their inventories down," says Stuart Hoffman, chief economist at PNC Financial Services Group.

And even if the recession ends later this year, as widely expected, the unemployment rate could rise well into early 2010.

That’s because the recovery could be too feeble to generate strong employment. “Maybe two-thirds of the recession is behind us, but I don't think we will be out the woods for at least eight to nine months," says PNC's Hoffman.

How should you trade it?

I think the ADP numbers tempered expectations, muses Fast Money trader Tim Seymour. So, if the number comes in anywhere under 500, I think you see a market rally.

And don’t forget, employment doesn’t drive the economy it reflects it, says Chris Thornberg Of Beacon Economics. The numbers we see on Friday are carry-overs from the nasty first quarter.



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