Morning Market Update for Wednesday March 31st

The eerie economic as well as political correlations/similarities to the period of the 1930's continues to gain momentum. Continuing high levels of joblessness, ineffective government spending programs, increasing federal entitlements, constitutionally questionable legislation…for those of us that are history fans it almost looks like 'play it again Sam'!
I guess only time will tell if we are truly smarter than our ancestors (like everyone seems to think!) and we can return to a thriving economic scenario in the short term. Although at this point the odds don't seem to favor that outcome. And I hope that we will not have to have another WWII to shake us out of our doldrums!

prb

From: S&Y PSG Morning Market Update for Wednesday March 31st

…the housing market, although showing signs of life, has yet to surprise anyone with its strength. Similarly, even with gains in the past few months, the US labor market is still very weak, jobs creation is anemic and most analysts do not expect the unemployment rate to decline appreciably over the next few years. In addition, inflation is virtually nonexistent. This suggests that economic growth will remain weak for some time, and rates/yields should not experience
undue upward pressure. Finally, the Fed will almost be forced to remain on the sidelines as long as unemployment remains so high.
 Earlier today, Wednesday March 31, ADP reported its payroll change for March. The report showed an unexpected decline of -23,000 in ADP processed payrolls; i.e. job cuts. (The ADP data covers 365,000 of ADP’s non-farm clients
and represents approximately 24 million workers.) The market consensus had projected a rise of +40,000 in the March ADP data, so today’s report was a bit of a surprise. Presumably, US companies are still reluctant to start hiring until they have a higher degree of confidence in the sustainability of the US economic recovery, and can count on an appreciable rise in final demand.
 The unexpected decline in the ADP payrolls creates nervousness in the markets on the eve of the Labor Department’s employment report scheduled for Friday (4/2) morning. Although the historical correlation between the ADP report and the “official” non-farm payroll report is not very strong, there is a general sense that if ADP payrolls are falling, perhaps the market expectation of payroll gains on Friday are overly optimistic. At the moment, the consensus estimate for March non-farm payrolls is for an increase of +184,000. If the consensus prediction is correct, it would be the first increase over +150,000 in monthly payrolls since March of 2007.