Sunday, August 05, 2007

Less Jobs, More Worries


Andrew Farrell, 08.01.07, 1:50 PM ET

It might be time to add job growth to the housing and credit worries looming over equity markets. U.S. employment grew at its weakest rate in four years according to a report published Wednesday based on payroll data.

Non-farm private employment grew by 48,000 during July according to an analysis of payroll provider ADP's U.S. business clients by Macroeconomic Advisers. The growth is the smallest increase since July 2003 and plummeted from a June increase of 150,000. (See: "Rising Bond Yields Hold Back Stocks")

Joel Prakken, Chairman of Macroeconomic Advisers, said employment growth was dragged down by slowing economic growth and weaker hiring from home construction and auto builders. He said those factors will probably keep employment growth weak for the next few months but predicted a rebound in early 2008.

Weaker employment from the home construction industry comes as little surprise. Homebuilders like Lennar (nyse: LEN - news - people ) have reeled from a weak housing market and have cut back dramatically on construction. Their woes continued Wednesday when Beazer Homes (nyse: BZH - news - people ) lost over a third of its market value in minutes on rumors that builder was about to file for bankruptcy protection. (See: "Beazer Plunges On Rumors")

The weak July ADP numbers forbodes a disappointing surprise from the non-farm payrolls data that will be released this Friday by the Department of Labor. Consensus expectations for the Labor Department Data, which includes government employment, is 135,000. The ADP report shows July job growth of 75,000 when including government employment.

The weak employment data could indicate further sluggishness in the U.S. economy and encouraged a flight to quality Wednesday. Investors put money in government bonds and pushed the yields on ten year treasuries down 0.24% to 4.75%.

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