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Daily Blog -03/06/09- 1:47 P.M.

Market Gains Evaporate After Jobs Report

The markets have now given back the brief gains achieved after the Non-Farm Payrolls report came in better than expected. The Dow has declined to the low of the day with a loss of -78 points to 6512 and the Nasdaq has traded briefly below 1275. The economy lost 651,000 jobs in February making it the fourth month of 600,000 job losses or more. The losses for January increased to 655,000 from 598,000 and December's number was revised up to 681,000 from 577,000. Over the last three months the economy has lost 1.987 million jobs and 3.6 million jobs since December 2007.

Those job losses are only in the salaried job market. The household employment losses are even worse. Household employment fell by 1.239 million jobs in February. That number is somewhat overstated because of a change in the way it was counted. This accounted for 400,000 of those 1,230,000 lost jobs but that is small comfort to those who are now unemployed. The number of unemployed household workers increased by over 4 million over the last 12 months.

The unemployment rate increased by 0.5% to 8.1% but that is just one more step on the way to 9% to as much as 10% according to some analysts. This is the highest level since 1992 and the magnitude of the current employment crisis is the worst since the late 1940s when the war machine shutdown and America had to retool and millions of workers were released from prvate service making war machines.

Payroll Chart

The consensus job loss number was 648,000 but there were many estimates in the 700-720K range with whisper numbers as high as a million jobs lost. The massive weekly unemployment claims at 630-650,000 a week suggested the overall job losses could have been a lot higher. The smaller than expected payroll number prompted a spike in the Dow to 6755 and a +158 point gain. That gain has been completely erased and the Dow is on the verge of breaking below 6500 as I write this commentary. The outlook for the close does not look good.

There is no support below our current level and without a sudden news event to produce a short squeeze the odds are good we could see a continued decline into the close. On Friday's we either sell off into the close as all longs run for cover to avoid some weekend news event or in cases where we are so severely oversold there is a rush to cover shorts going into the close. Shorts rush to take profits and avoid any weekend news events. That suggests the rest of the day will be strongly directional but we don't yet know the final direction.

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