Unemployment Jan 2011

Unemployment has always been a very volatile trading day.  But, recently, the action has been pretty muted.  I suspect today’s action will be muted as well.  Yesterday, Gallup released a survey showing some really poor numbers.  The market shrugged it off.  Gallup doesn’t have that much credibility when it comes to forecasting unemployment.

Numbers may be higher, but they will be blamed on the weather.  The US has had some atrocious weather over the past month.  Lots of snow in the northeast, lots of ice in the south.

Meanwhile, elements of Obamacare are being phased in slowly which is a drag on hiring.  Indicators in the economy haven’t given signals for companies to ramp up hiring either.  There is no Sound and Fury moment to compel companies to grab workers.  Virtually all economic indicators are mixed.

Temp worker employers like Robert Half had lackluster earnings results.  That doesn’t lead me to believe the situation on unemployment will have changed.  At the same time, I am not looking for a big sell off in stocks unless the number is really bad-meaning a headline number that jumps close to or over 10%.  Expectations for the headline rate are around 9.5%.

Looking inside the number, the keys for me are always hourly wages, hours worked, overtime hours worked, the amount of frustrated workers and the U-6 rate.  We can’t have rampant inflation without employment improving.  People need money to spend it.  However, we can have certain goods or services get inflated for short periods of time.

Over the past several months, trading the employment number has been a bust.  It has only been a good day to either unwind positions, or put positions on. Intraday scalping of the market has been pretty pointless.

Read more at Points and Figures