BOSTON ( TheStreet) -- After the best three-day winning streak for stocks since March 2009, there's a lot riding on Friday's employment report. Unfortunately, investors are faced with two separate estimates that paint two very different pictures about the U.S. labor market.
After yesterday's announcement of coordinated action by central banks around the globe to add liquidity to the banking system, the S&P 500 surged 4.3%, capping a 7.6% gain over three days. Amid the euphoria, investors cheered the ADP Employment Report, which estimated that the private sector added 206,000 jobs in November, double that of previous months. For investors, it was a loud signal to buy stocks.
"November's increase in employment normally would be associated with a decline in the unemployment rate," Joel Prakken, chairman of Macroeconomic Advisers, said in a statement Wednesday. "An acceleration of employment is consistent with data showing that GDP growth, which slowed sharply around the turn of the year, is gradually recovering."
ADP's estimate compares with economists' consensus of 126,000, according to a survey by Bloomberg. TrimTabs Investment Research is even more cautious. The company said Wednesday that the U.S. economy likely added only 64,000 jobs in November, an estimate that went unnoticed by investors caught up in the exuberance of a nearly 500-point gain on the Dow Jones Industrial Average."The sharp deceleration in job growth in November has us concerned," says Madeline Schnapp, director of macroeconomic research at TrimTabs. "It appears that hiring managers have rolled up the welcome mat due to the raging debt crisis in Europe." How could two firms measuring employment come to such disparate figures? The difference between ADP's call of 206,000 and TrimTabs' 64,000 is a staggering 142,000. For some context, the Bureau of Labor statistics said the U.S. economy added only 80,000 jobs in October. ADP says its estimate for private payrolls growth is derived from actual payroll data. Chances are that your paystub has the ADP logo in the top right corner, which means the firm is measuring jobs in the most direct way it can. TrimTabs' employment estimates are based on an analysis of daily income-tax deposits to the U.S. Treasury from all salaried U.S. employees. Schnapp says that while the measure isn't perfect, it's a better view than a survey subject to revision. "Everybody looks to the BLS
>To contact the writer of this article, click here: Robert Holmes.