Those looking for a clearer picture of the state of the US economy will be forgiven for ending up none the wiser following last night's data releases out of America.
On this one trading day alone, we witnessed precisely the reason behind Wall Street's lack of conviction, its indecision to move forward or retreat. Shall I spell it out for you Virginia? Economic indicators are pointing to a mixed picture of Uncle Sam.
Whatever your predilection, whether you're the horned or the furry kind, there's a statistic out last night to support your point of view.
They become especially important because they're the last ones we'll see before the mom of all stats - the US non-farm payrolls report - is released tonight. The one that'll set the tone for financial markets over the next four weeks, at least. It could give birth to renewed optimism or it's carrying the devil's child.
Consensus expects the report to show that employment grew by 160,00 in April with the unemployment rate holding at a three-year low of 8.2%. Would the actual print disappoint like the less than expected 120K added to payrolls in March?
Those thinking it would point to last night's worse-than-expected drop in the Institute for Supply Management non-manufacturing index. The index dropped to 53.5% in April. Although it indicates that America's service sector continued to expand last month, the 2.5 point drop is five times market expectations for only a 0.5-point dip.
More relevant, the employment component of the index dropped to 54.2 -- the weakest reading this year -- from 56.7 in March and put a question mark over yesterday's ADP private payrolls report showing that services accounted for most of the growth in private sector jobs created in April.
Yes, the US labour market is slowing.
Then again, maybe not. Those expecting that the actual jobs number will come in better than expected have the latest unemployment claims report to back them up. Initial jobless claims fell to 365,000 in the week ended 28 April - the lowest in a month - from 392,000 in the week prior and against expectations for a decline to 379,000. The 27,000 drop (392K less 365K) is the biggest weekly drop in a year.
No, the US labour market is not slowing.
But here's where we go back to iffy. US-non-farm productivity fell to a 0.5% annual rate in the first quarter from 1.2% in the December quarter. It's iffy, because the drop in productivity could be interpreted as one for the horned variety or for the furry one.
The positive - the drop in productivity means that businesses need to increase hiring to increase production. The negative - businesses have increased staffing levels more than required and so expect heads to roll going forward.
I don't know. The American Association of Individual Investors' (AAII) latest survey found exactly this indecision. According to AAII,
"This week's special question asked AAII members if they thought prospects for the U.S. economy have improved over the past few months. The responses were evenly split.
"Among those who thought conditions have not improved, Europe's sovereign debt crisis was frequently mentioned as an ongoing threat. Others said economic conditions, including inflation, were worse than the data suggests.
"Among those who thought the economy is getting better, improvements in the economic data and the markets were cited. Respondents in both groups said they were keeping an eye on events in Congress and on the outcome of the upcoming presidential election."
Guess we all have to wait until later tonight when the US non-farm payrolls report to put us out of our misery - so we could see clearer where Uncle Sam is heading ... over the next month at least.
