Tradex Commentary: Jobless Claims

TRADEX GLOBAL INTERNAL COMMENTARY

First time unemployment claims dropped in the week through June 30th 14k to 374k, a number that is still higher than we need to get excited.  Private employers expanded payrolls by 176k, and according to ADP this exceeds even the most optimistic economists' expectations. The numbers in the past few months had all sorts of market pundits talking about the imploding jobs market and this number will bring a sense of calm (for the moment). Two bright spots are that “services sector” and “small businesses “ that look to have been very strong and might signal that even with a lousy ISM number, companies are still hiring. Markets are taking the reports with modest excitement, and I would bet most market watchers who are having some time to think it over will come to the same conclusion I have come to: Europe is broke and cannot pay its debts and China is slowing fast with a huge potential for a property bubble burst (ouch). In that scenario, I believe we are in for a bumpy ride through the end of the year. I see correlations between HF’s and S&P extremely high and correlations between HF strategies also higher than normal. We will have the lowest amount of managers we have ever had and will focus on our extremely uncorrelated managers to keep making good returns. Keep nimble. Michael Beattie

EXTERNAL RESEARCH COMMENTARY

Fewer Americans filed first-time claims for unemployment insurance payments and companies added more workers than forecast, easing concern the labor market is faltering further. Applications for jobless benefits fell 14,000 in the week ended June 30 to 374,000, Labor Department figures showed today. Private employers expanded payrolls by 176,000 last month, according to figures released today by Roseland, New Jersey- based ADP Employer Services, exceeding the most optimistic estimate in a Bloomberg News survey of economists. “Before today it was pretty clear the labor market had softened over the past few months,” said Daniel Silver, an economist at JPMorgan Chase & Co. in New York. “Today’s reports show a little bright spot. The fear of a much weaker payroll number has been reduced.” Labor Department data tomorrow may show the pace of hiring accelerated in June while remaining at less than half the average for the first quarter of the year. The report covers both private and government employers. Other figures today showed service industries expanded at a slower pace in June, underscoring Federal Reserve concern that economic growth isn’t strong enough to reduce unemployment. U.S. stocks fell, snapping a three-day advance for the Standard & Poor’s 500 Index, as disappointment over the European Central Bank’s efforts to tame the debt crisis overshadowed improving American employment data. The S&P 500 declined 0.4 percent to 1,368.56 at 12:33 p.m. in New York. Treasuries gained, pushing the yield on the 10-year note down to 1.59 percent from 1.63 percent late on July 3.

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