Something's a Miss

I am getting ready for tomorrow’s big April jobs number from the Department of Labor, but am worried about a less than stellar number.  I hope I am wrong and probably am but this week’s ADP private sector jobs number was up by 179k but far weaker than the 200k expected number.  Today’s weekly jobless number ratcheted way to 474k from the expected 400k, this is very unsettling because the downward sloping trendline that has been in place for months now has broken to the upside, this portends a weak hiring environment.  This week’s numbers won’t be included in Friday’s number but makes me worry that the trend did not start this week.  If that is not enough, yesterday’s ISM non-manufacturing came down to 52.8 from last month’s 57.3, this still implies an expanding service sector as any number above 50 is expanding and anything below 50 is contracting.  This is the second month in a row that the service sector has slowed its expansion and that is another reason I am worried that Friday’s number may come in weaker than thought.  I think the US will still create jobs in the private sector and shed jobs in the government arena, that is as it should be however we need to be creating 400k plus jobs a month just to catch up from the recession and while 2  months in a row of 200k job creation is better than a sharp poke in the eye, it is still weak.  I want to be very clear here that I am not bearish on the economy or the markets yet, but my antennae is up for any and all suspicious market data going forward now.  The market is expecting another month of 200k job creation from April, anything short of 175 will add to the selling we have been getting and needing by the way.  If the jobs number is above 240k, then I think we get a relief rally in all risk assets, i.e. stocks, the US dollar  and commodities and selling of US treasuries.  One positive takeaway this week is that the 1^st quarter productivity number rose by 1.6% and unit labor costs rose 1% in Q1 as well.  This means that employers were working their employees harder and having to pay them more in the 1^st quarter than the 4^th quarter of 2010.  This isn’t new news as I have been saying for months that I thought this was happening, it merely confirms my thesis that at some point this year employers will be forced to hire more employees in order to grow.  I just hope that a slowdown in the economy as a result of the Fed stopping the purchases of US Treasury securities doesn’t derail it.  Right now the bond and stock market is telling me that a slowdown or double dip mini recession is more possible now.