It's a dirty little secret that only a few of the economic reports so breathlessly reported every day really matter to traders. When the Bureau of Labor Statistics releases its non-farm payroll data for May at 8:30am est on Friday morning you'll be able to hear a pin drop on Wall Street.
The FOMC's dual mandates are controlling inflation and fostering an environment conducive to job creation. For the most part inflation is in check but improvements in the jobs market have been sluggish at best. Ben Bernanke's Fed is going to keep the pedal to the metal on stimulus until the unemployment rates drops below 6.5%.
Daniel Alpert of Westwood Capital says the jobs report for May has been testing the bulls' conviction for a month. "A lot of what's happened over the last 30 days has been driven by last month's BLS number" Alpert says in the attached video "When you actually look under the hood of that number some of the things aren't very good".
Of particular concern to Alpert and Americans as a whole are the nature of jobs being created. Most or all of the jobs created in April were part time jobs in the service sector. That means waiters, waitresses and retail clerks found work but not careers.
Despite the economy tacking on 165,000 jobs, the hours work actually declined. So not only are the jobs being added low on pay and benefits, they're also long on hours.
Being employed is good for the soul, but in terms of the economy the positive impact from individuals going off the dole to take low-end jobs is "quite modest" as Alpert puts it. Working long hours at low pay explains the combination of gradually increasing jobs data and weak consumption numbers.
Conventional wisdom says a weak NFP report is bullish because the FOMC will continue to print money. As is often the case, conventional wisdom is wrong. Boomers are leaving the workforce and service jobs are growing. That means the unemployment rate will drift lower without any economic improvement.
Investors have plenty of cash on the sidelines they just don't have a reason to put it to work. Since Alpert doesn't see the economy improving any time soon he concludes "the only reason to put the money out is the theory that the Fed is going to continue to pump."
The only bullish combination tomorrow morning is that the economy added fewer than the 159,000 jobs estimated BUT the jobs that were added were full-time and high paying. That's a lot to ask for from any government data point.