This Morning's Jobs Numbers

Earlier this week, the ADP employment report caused distress with a weak 13,000 net private sector jobs created.

As of 7:20AM, as I'm writing this, the Labor Department's 8:30AM jobs report is considered to be the main driver of equity markets. Everyone is curious about how low net private sector job creation will be. Kelly Evans' Wall Street Journal column suggests that the bar is so low, and has been factored into the market, that a slight upward surprise may ignite equities today.

Yesterday, on CNBC, a poll of expected jobs numbers revealed that 84% of respondents thought today's numbers will be weak. Therefore, claimed the co-anchors, the odds of a positive surprise and consequent sharp upward equity market reaction were very good.

If we were discussing betting on a one-off roulette wheel spin, I guess I'd find all of these sentiments and bets, as it were, believable.

However, just this morning on CNBC, economist Bob Barbera, late of ITG, now with a hedge fund whose name I did not catch, recanted his longtime bullish read on employment numbers of the past six months or so.

I can recall, within the past few months, at least one Friday in which job growth beat expectations, but, within a week, equity markets fell.

Take a step back from the hooplah around market reaction in just over an hour, through futures, and then the 9:30AM US market open.

Instead, think about the longer term implications of even 100,000 net private sector jobs created.

Unlike past recoveries, this one hasn't exhibited robust job growth. Earlier this week, on CNBC, Alan Greenspan noted the real meaning of the rise in average hours worked over the past few months.

In a comment eerily reminiscent of Amity Schlaes' book The Forgotten Man, Greenspan explained that companies are working their existing employees longer, rather than hire more of them. Very much like Shlaes described the Great Depression, in which the common wisdom was,

'If you had a job, you were okay. But getting a new one was next to impossible.'

Now, take a look at the context of this aftermath of recession.

First, rather than see the prior recession as, well, a normal phase of an economic cycle, our government has attempted to criminalize it. Whole sectors have been vilified and demonized for contributing to what is, in reality, a naturally-occurring phase in economic cycles.

In reaction, wholesale legislative restructuring of the US finance and health care sectors have been undertaken, as well as a substantial governmental involvement in autos, through its ownership of GM.

Then you have the expiration of the Bush tax cuts next year, combined with significant tax rate increases, and new taxes, under the guise of the health care 'reform' bill.

Art Laffer has come out swinging, as it were, a la Babe Ruth, and called his shot- US economic collapse in 2011. Why?

Because higher taxes means less consumption and investment.

For businesses, higher consumer payroll taxes mean less disposable income available to buy products. Thus, Laffer's contention that economic growth is good in 2010, as US companies shove as much product out the door while consumers can still afford them.

Then there's investment. When tax rates rise, investment incentive in the marginal economic venture drops, cutting off growth. Since so much growth is in new, often smaller-scale business, not existing S&P500 type entities, it's not clear that surveys of hiring intent can even observe this source of missing new jobs.

The global context isn't exciting, either. China recently recast recent economic growth data to portray a slowdown. European government budgets are tightening, so their voters are rioting in the streets- literally.

I'm getting depressed just writing this post.

But, seriously, does any thinking business person with a grasp of macroeconomics and microeconomics, and some sense of economic history, see the current period and next six months as symptomatic of a healthy, growing economy in the US?

Between global sovereign deficits and money creation, over-regulation in response to a recent economic downturn, and higher tax rates, it's really hard to see a short-term basis for robust private sector expansion in the US and/or consumer demand globally.

Thus, regardless of today's employment numbers and their effects on today's closing, pre-holiday S&P500 index level, it's far more likely that it will be an underwhelming piece of data in the broad, longer term mosaic of global economic data past, present and future.