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From Staff Reports
The Labor Department will release its September jobs report early today (Friday), the first such reading since the now-infamous "shocker "August payrolls report that stunned investors, sparked a stock-market sell-off and essentially forced the central bank to slash short-term interest rates.
The August jobs report, released Sept. 9, showed that the U.S. economy lost 4,000 jobs – the first decline in four years – and didn't post the gain of 100,000 jobs that economists and investors had anticipated. It was a big miss. And that usually elicits a big reaction. This time was no exception: Investors sent stock prices straight down: The Dow Jones Industrial Average plunged 249.97 points, or 1.87 %, to close at 13,113.38.
Nine days later, with talk of a looming potential recession making the rounds, the U.S Federal Reserve surprised investors again, this time in a positive way, by cutting short-term interest rates by a bigger-than-expected half a percentage point. Stock prices have soared in approval: Early this week they set an all-time high with the Dow closing above the 14,000 level.
What are economists expecting now?
While economists and investors will be watching Friday's report closely to see what it means for future Fed action, there will also an interest that transgresses interest rates. Stuart Hoffman, chief economist with PNC Financial Services Group, told CNN.com that that if the September jobs report is again much weaker than expected – especially if there's another decline in the payroll ranks – it will be very bad news for the economy.
"I think the chance of a recession is less than a third," Hoffman told the news service. "If we see another drop in employment, especially in the private sector, I'd be surprised if not shocked, and very nervous. I might put the chance of a recession at 50-50. We might be hanging by our fingernails in that case."
Economists surveyed by Briefing.com are forecasting a 100,000 gain in payrolls in September – or roughly the projection that was made for the last jobs report that proved to be so far off the mark. Even if there is a payroll gain of that magnitude, the U.S. unemployment rate is expected to climb from 4.6% for August to 4.7% for September.
[It's also possible that the August payroll losses of 4,000 will be revised into positive territory, since August is one of the months that can elicit some of the largest revisions of initial readings, economists say].
Stocks have been directionless since Monday's huge rally, which left the Dow sitting at a record high of 14,087.55. That advance followed several weeks of upward trading after the first central bank rate cut in four years. Investors didn't want to place big bets ahead of today's employment report.
Yesterday (Thursday), the Dow Jones Industrial Average rose 6.26 points, or 0.04%, to close at 13,974.31. The tech-laden Nasdaq Composite Index rose 4.14 points, or 0.15%, to close at 2,733.57. The Standard & Poor's 500 Index rose 3.25 points, or 0.21%, to close at 1,542.84.
"It's [been] a complete wait … to see what the employment numbers are," Todd Clark, director of stock trading at Nollenberger Capital Partners Inc. in San Francisco, told CNN.com.
Ideally, investors and economists are looking for "Goldilocks" results – those that are "just right."
A stronger-than-expected jobs report might upset investors, boosting the belief that there isn't much room to cut interest rates anymore.
A report that is much weaker than anticipated would cause a big jump in concerns that a recession is a real cause of concern – even with rate cuts.
The best outcome: A jobs report that was slightly weaker than consensus forecasts would be the best for share prices, as it would increase the likelihood that the economy is strong enough to keep out of a recession – but that continued Fed rate cuts are probably needed to make sure that scenario comes true.
Said Nollenberger Capital Partner's Clark: "This is going to have to be a just right, 'Goldilocks' number."
News and Related Story Links:
Jobs: Brace for More Weakness.
Stocks Inch up Ahead of Jobs Report.
- Money Morning News Analysis:
'Shocker' Jobs Report Brings Rate Cut Closer.
- Money Morning News:
Surprisingly Dismal Jobs Report Unleashes Its Fury on the Federal Reserve and Wall Street.