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Payrolls To Allow Stocks To Rally On Any Good News From G20

Source: Bloomberg

The headline employment number was weak, coming in at only 80k jobs added versus expectations of 95k. However, the employment numbers for the previous two months were revised up by a net total of 102k. The unemployment rate also fell to 9% from 9.1% previously. Overall, the numbers were therefore a touch better than expected. The labor market is clearly anemic. However, we are not seeing any worsening beyond expectations. Overall, as we argued last month this points to an economy that is weak but most likely capable of skirting around the threat of recession.

Released on 11/4/2011 8:30:00 AM For Oct, 2011
Prior Prior Revised Consensus Consensus Range Actual
Nonfarm Payrolls – M/M change 103,000  158,000  90,000  64,000  to 152,000  80,000 
Unemployment Rate – Level 9.1 % 9.1 % 9.0 % to 9.2 % 9.0 %
Average Hourly Earnings – M/M change 0.2 % 0.3 % 0.2 % 0.1 % to 0.2 % 0.2 %
Av Workweek – All Employees 34.3 hrs 34.3 hrs 34.3 hrs to 34.3 hrs 34.3 hrs
Private Payrolls – M/M change 137,000  191,000  120,000  100,000  to 168,000  104,000 

Source: Bloomberg

From here the market’s focus will of course be on the G20 in Cannes and the ongoing issues with the European debt markets. I contiunue to believe that the outlier is likely to be some unexpectedly strong co-ordinated action. As I argued in an article this week, this could involve:

  • An overall stimulus commitment from a number of member countries – and particularly those currently running current account surpluses
  • The black swan would be a deal on investment in clean energy (with potentially Germany, China and Japan being key players). Given that solar stocks as a whole are down so heavily this year, perhaps the most interesting announcement bet is simply to be long solar ETF TAN.

You can read the original article on these issues here. The bottom line is that the G20 leaders know that this is a critical moment for the global economy. As a result, they may well deliver more than expected.

Disclosure: I am long SPY and TAN.