Dow Jones Today is Unimpressed with Weak Jobs Report

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is relatively unchanged today, up seven points, to 15,451, at 1:30 p.m. EST, after a weaker than expected private sector jobs report. The S&P 500 (SNPINDEX: ^GSPC  ) was down two points to 1,753.

There are two U.S. economic releases affecting the blue-chip index today.

Report

Period

Result

Previous

ADP private sector jobs report

January

175,000

227,000 (r)

ISM nonmanufacturing PMI

January

54%

53%

The Automatic Data Processing private sector jobs report showed nonfarm employers added 175,000 jobs in January, lower than analyst expectations of 189,000 jobs and below than December's downward revised 227,000 jobs. ADP had previously estimated the private sector added 238,000 jobs in December.

ADP Change in Nonfarm Payrolls Chart

ADP Change in Nonfarm Payrolls data by YCharts.

The private sector jobs report gives economists an advance idea of how the government's main jobs report will turn out. Analysts expect the Labor Department on Friday to report that the public and private sectors added 190,000 jobs in January, after only adding 74,000 jobs in December. December's weak report was attributed to bad weather affecting jobs and reporting.

US Change in Nonfarm Payrolls Chart

US Change in Nonfarm Payrolls data by YCharts.

We will have to wait and see what happens on Friday. Unless the January jobs report is also terrible, which seems unlikely, the basic story of the past few years remains unchanged. The economy continues to add roughly 180,000-200,000 jobs a month, which combined with baby boomers retiring is lowering the unemployment rate faster than many expected. More people with jobs and a lower unemployment rate is good for the economy. The flip side of this is that it may be bad for the market.

The Federal Reserve has been surprised by how fast unemployment has fallen. As such the Fed taper of its economic stimulus has started with unemployment near its target of below 6.5%. With the central bank purchasing fewer long-term assets each month, I expect rates to stay above last year's level and profit growth to be challenged.

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11/24/2014 4:30 PM
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