Monday's surprisingly strong manufacturing ISM report is followed up by a depressingly weak labor market reading from payroll processor Automatic Data Processing (ADP). The ADP report effectively ensures that estimates for Friday's jobs report from the government's Bureau of Labor Statistics (BLS) will be coming down from the 165K level. All of this adds to reports out of Europe indicating that the region's economy may be undergoing a deeper downturn than many are expecting.
A total of 119K private sector jobs were in created in April, according to ADP, significantly below expectations of around 175K. The jobs number for March was modestly revised downward to 201K (from 209K). All the gains came from the service sector, which offset losses in the goods producing sectors. Contrary to what we saw in Monday's manufacturing ISM report, where the employment component reached its highest level in months, the ADP report shows jobs losses of 5K in manufacturing during the month.
Expectations for Friday's jobs report from the BLS are bound to come down from the 165K following this very weak reading. The ADP report has not been very precise in foretelling the BLS reading lately. It was way stronger in March than what came out of the government report and had been undershooting the BLS report in the three months prior to March. We will know Friday morning how accurate the April ADP reading is, but fears of a recurring labor market "spring swoon" do not appear to be unfounded.
On the earnings front, Comcast (CMCSA), Time Warner (TWX) and CVS Caremark (CVS) came out with better-than-expected earnings and revenue results. Chesapeake Energy (CHK) posted weaker-than-expected results and announced the separation of the Chairman and CEO positions in response to the recent controversy about Chairman/CEO Aubrey McClendon's unusual compensation arrangement with the company. Chesapeake, like many other exploration and production companies, has been hit hard by depressed natural gas prices.
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