Waiting for Friday's Jobs Report - Analyst Blog
June 02 2011 - 5:11AM
Zacks
The market is justifiably nervous about the economy's growth
momentum. The expectation earlier on was that the first quarter's
sub-par growth pace was due to transitory factors that will get
reversed in the second and subsequent quarters. But over the last
month or so we started seeing a slew of weak economic readings
indicating that the first-quarter softness has continued into the
current period.
Even as GDP growth estimates for the current quarter have started
coming down in recent days, estimates for the second half of the
year have remained unchanged at the over-3% level. But
weaker-than-expected economic readings, such as Wednesday's
ISM/
ADP (ADP) and today's Jobless Claims reports,
increase the odds that we will start seeing those estimates coming
down in the coming days and weeks.
It is with this unsettling backdrop that the market is looking
forward to tomorrow's non-farm payroll report for May. Positive
momentum on the manufacturing side and favorable trends in the
labor market had emerged as two reassuring elements in this
economic recovery.
But the red-hot manufacturing sector appears to have started
cooling off, as indicated by Wednesday's ISM Index and a host of
regional manufacturing reports in the last few days. And signs on
the labor market front also don't appear to be promising following
Wednesday's disappointing ADP report and this morning's mixed
Jobless Claims numbers.
The ADP disappointment has prompted downward revisions to
expectations for May jobs numbers coming out Friday. A negative
surprise on that front will most likely result in cuts to
second-half growth expectations.
Today's Jobless Claims report mixed, with the weekly number
dropping by 6 thousand to 422 thousand, but the drop was from a
upwardly revised level for the preceding week. The prior week's
level was raised from 424 thousand to 428 thousand. The expectation
was for a 4 thousand drop to 420 thousand. This maintains the
unfavorable trend in this key series that has remained in place in
recent weeks. The 4-week average dropped by 14 thousand to 425
thousand.
On the earnings front, we got a better-than-expected report from
Joy Global (JOYG) this morning. The mining
equipment maker came ahead of earnings and revenue expectations and
guided higher.
Orbitz Worldwide (OWW) got relief
from an Illinois court in its dispute with
American
Airlines (AMR), paving the way for AMR's flights to show
up on the travel site.
Shares of
Apollo Group (APOL),
ITT
Educational Services (ESI) and other for-profit education
companies will remain in the spotlight today as a key ruling from
the U.S. Department of Education has turned out to be less severe
than initially feared.
The major news of the day is the mixed read on the Jobless Claims
front, which will give further impetus to bringing down
expectations for tomorrow's non-farm payroll report.
AUTOMATIC DATA (ADP): Free Stock Analysis Report
AMR CORP (AMR): Free Stock Analysis Report
APOLLO GROUP (APOL): Free Stock Analysis Report
ITT EDUCATIONAL (ESI): Free Stock Analysis Report
JOY GLOBAL INC (JOYG): Free Stock Analysis Report
ORBITZ WORLDWID (OWW): Free Stock Analysis Report
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