Beware Friday’s Jobs Report

This is the first full week of the fourth quarter. The big economic news will come on Friday with the September jobs report. This will also be the last jobs report before the election. The bad news is that the labor market is still in very rough shape. Wall Street expects that unemployment will tick up from 9.6% in August to 9.7% in September. This means that despite impressive growth in profits, it’s not trickling down to new jobs.

Fed Chairman Ben Bernanke will speak later today and Wall Street will be paying even closer attention than usual. The reason is that the Fed is expected to announce another round of “quantitative easing” which is a fancy name for a money dump. Bernanke, of course, won’t say this explicitly. Instead, he’ll imply his actions under a blizzard of econo-speak. Any clue we can find will be a big deal. Personally, I don’t think a QE announcement will come until after the election. Bear in mind that the two-year Treasury just hit an all-time low of 0.375%. Ouch!

The other big news for this week is the start of earnings season. Alcoa (AA) is set to report this Thursday. Wall Street expects to see Alcoa report earnings of six cents per share which is a big bust from the 28 cents per share they earned a year ago. Earnings season won’t kick into high gear for the rest of Wall Street until next week and the week after.

Interestingly, Wall Street analysts are beginning to pare back some of their earnings estimates. It’s not big but it’s noticeable because the analyst community hasn’t done this in a long time. Almost continuously since the world exploded, analysts have raised and raised their forecasts. More than 70% of S&P 500 companies have topped Wall Street’s forecast for four-straight quarters. That’s the longest streak since 1993.

Last month, Wall Street’s consensus earnings forecast for S&P 500 earnings for 2011 got as high as $96.16. Now it’s down to $95.17. Like I said, it’s not a major change but it’s the first move lower in a long time. I’d also point out that eight of the 22 worst days ever have come in October.

Finally, here’s a look at how many Americans have been unemployed for 15 weeks or longer. This shows you how different this (former??) recession is from previous ones.

Posted by on October 4th, 2010 at 11:14 am


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