Analyst: Expect tomorrow's net jobs gain to be ... 54,000

Really?  Expectations among economic analysts for tomorrow’s job number revolve around a mediocre 150,000, which an earlier CNBC report called “sharply higher” over April’s 115,000 added jobs, which is an absurd description; that’s barely outside of a margin-of-error revision.  Today’s even-more mediocre ADP report still pegged private-sector growth at 133,000, and while ADP tends to come in high, that would be a rather significant miss.

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Still, MIG Bank’s Ron William tells CNBC that expectations are overstated, and that the trends and momentum portend a much lower level of job creation than even the water-treading level suggested by ADP.  In fact, it’s likely to get even worse this summer, and perhaps drop into negative territory:

When looking at an economic indicator from a technical analysis perspective, the factors to look at are key levels, changes in momentum, cycles and correlation, according to Ron William, a technical analyst at MIG Bank.

“Nonfarm payroll has been decelerating since the beginning of 2012,” William told CNBC.com. “The probability of an acceleration of that down move is high over the next two quarters.”

The data lost positive momentum after failing to hold above the 2011 high of 251,000, and has also remained beneath a multiyear ceiling of around 340,000. During January 2012 “the loss of upside momentum triggered a DeMark exhaustion signal,” he said.

An exhaustion signal usually indicates a reversal in the trend. The DeMark Indicators are a collection of sophisticated market-timing tools created by Tom DeMark over the course of nearly 40 years in the financial industry.

“The key level that everyone in the market should be focusing on [for nonfarm payrolls] is 54,000,” William added. “I think that over the multimonth period the probability favors that we test this area and maybe move into negative territory if it is confirmed.”

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Over the next two quarters?  That’s exactly what the White House and Barack Obama’s campaign don’t want to hear.  They have insisted that Obama has built momentum for economic growth, and the winter seemed to have hinted at some kind of momentum shift to the positive.  Now we’re looking at the potential for job numbers to return to sub-100K growth levels, and potentially back in the red.  That’s not the kind of momentum that wins elections.

On the other hand, reader and commenter DogSoldier wonders whether this might be a bit of an expectations-management game in the investor community.  By getting a worst-case scenario on the table today, a mediocre result tomorrow might do less damage.  I’m not sure that the difference between the two points is significant enough for that to work, though, since even a 150K result will look stagnant and breed pessimism about summer growth.

Let’s take a poll to predict tomorrow’s numbers.  Rather than guess the rate this month, let’s focus on net job growth in tomorrow’s report.  What level do you expect to see? I’ll predict a net job gain of 90,000 and an unemployment rate of 8.2%.

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David Strom 3:20 PM | November 15, 2024
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