Saturday, May 8, 2010

Another way of thinking about the NFP report

Boy the market really liked the Non-Farm Payroll numbers! While job gains did come in at above expectations and analysis shows that temporary jobs continue to rise, albeit at a lesser rate, equities sold off as investors continued to de-risk.

Real-time market based signals
I have always been an advocate of looking at real-time market based signals instead of backward looking economic indicators for top-down macro analysis. So here is another way of thinking of the employment situation in the US.

Here are some charts of temp agencies and headhunters relative to the S&P 500. There aren't a lot of publicly listed companies but these charts give us a good idea of market expectations at a bottom-up level. Consider Manpower, which staged a relative rally in late November but broke down again. The chart is not a pretty picture:

The relative chart of Kelly Services tells a similar story:

Here is the relative chart of Heidrick & Struggles. While HSII has rallied somewhat in May, it remains in a relative downtrend.

It's the same story with Korn Ferry:

Regardless of what the NFP report said about employment gains, the market believes that employment is still weak. Get the picture?

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