March jobs data point to recession, but markets aren’t riled

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Wall Street is relatively subdued today despite the worse-than-expected March employment report. The Dow Jones industrial average fell about 100 points early on, but at 10 a.m. PDT was trading up 46 points at 12,672.

Although the net loss of 80,000 jobs in March cemented many analysts’ views that the economy has fallen into recession, there is no mad rush back into Treasury bonds today as a haven. The 2-year Treasury note yield has dipped to 1.84% from 1.89% on Thursday, but remains well above its close of 1.59% on Monday.

And commodities are holding up, belying expectations that more recessionary data on the economy could trigger a collapse of raw materials prices. Crude oil is trading up $1.70 at $105.60 a barrel.

All in all, the markets look like they’re becoming inured to bad news — for the moment, anyway.

Here’s a look at some of the written commentary from Wall Street this morning on the employment data:

• Goldman Sachs economists: ‘Nonfarm payrolls down 80,000 in March, more than expected, and prior figures revised down 67,000. With those revisions the nonfarm job count is down between 76,000 and 80,000 in each of the first three months of the year. Setting government aside, the private-sector job count is now down four months in a row, with the last two averaging more than 100,000. With payrolls one of the key indicators watched on the call for recession, the likelihood increases that the National Bureau of Economic Research will recognize that the business expansion ended late last year and that the economy has since been in recession. One bright spot is a 0.2% increase in the index of hours worked, which reflects an increase in the workweek — an unusual development in cyclical contractions. Even so, total hours worked fell 1.2% at an annual rate in the quarter, which is consistent with either a small decline or a small increase in real GDP.’
  

• Peter Kretzmer, economist at Bank of America: ‘Job losses were distributed across virtually all industries. Manufacturing shed 48,000 jobs, about half in motor vehicles, while rapid construction retrenchment continued, with 51,000 jobs lost in the industry. Notably, 15,000 construction jobs lost were in the nonresidential category, indicating that the housing declines have spread. With labor market deterioration affirming the weakness in the economy and likely to persist through much of 2008, we continue to expect significant Fed easing ahead, with the Fed’s target federal funds rate likely to fall to 1.5% by midyear [from the current 2.25%].’
  

• Ashraf Laidi, chief foreign exchange strategist, CMC Markets: The 2001 recession ‘had as many as 15 consecutive months of negative payrolls between March 2001 and May 2002, producing a monthly average [loss] of 148,000, while the 1990 recession -- lasting for 11 consecutive months between July 1990 and May 1991 -- [produced] an average of 147,000. In the current slowdown, not yet officially declared a recession, we’re only in the third straight monthly decline in payrolls, with the average standing at 59,000. Thus, to be consistent with previous recessions, payrolls will likely register negative readings for the rest of the year into Q1 2009. This also means that the unemployment rate will likely climb to as high as 5.9-6.0%.’