A Bad Jobs Report Was Expected, But Not This

November 10, 2008  

Futures have pulled back from earlier gains and bonds have pulled back as well after what has turned out to be a dreadful jobs release. Payroll losses exceeded the consensus — falling 240,000 in October, worse than the 200,000 estimate — and September’s figures were revised drastically lower to a 284,000-loss from a loss of 159,000.

That’s the worst one-month loss since 2001, and the unemployment rate rose to a 14-year-high of 6.5%. The swiftness of the rise in unemployment is stunning, as the household jobless rate stood at 5% as recently as April. The labor force participation rate was up by about 300,000, which suggests that the woeful economic situation is forcing people to continue to look for work.

“The consumer balance sheet pressures are likely to keep more individuals actively looking for work, regardless of whether that work is plentiful,” writes Guy Lebas, fixed-income strategist at Janney Montgomery Scott. “As a result, we could see a peak in the unemployment rate that exceeds the 7.8% hit in the wake of the 1990-1991 recession.”

There had been a sense that the two-day 9.7% decline in the Dow industrials reflected, in part, the desire to get ahead of the anticipated lousiness of this jobs data, but this exceeded the scenario investors had accounted for, judging by the pullback in equity futures. Standard & Poor’s 500 index futures were lately up 5.4 points, compared with a gain of 9.5 points prior to the report.

Meanwhile, more bad news came from Ford Motor, which reported a 9 million third-quarter loss, and about a billion operating loss from continuing operations. The company burned through .7 billion in cash in the quarter, and that rate has concerned investors and ratings agencies. Ford was up 5.5% in premarket action. General Motors is set to report earnings at 10:30 a.m. ET, an odd intra-day report.