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Employment stocks point to potential gloomy jobs data

Dr. Joe Duarte
0 Comments| April 2, 2009

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The employment related stocks are suggesting that although there may still be some tough sledding ahead, the worst may be over. Yet, the final word won't be in until Friday, when the employment report is released.

We'll start with the best looking stock of our trio of bellwethers, Administaff (NYSE: ASF, Stock Forum). We use this to measure the prospects for small business, the largest producer of employment opportunities in the U.S. Administaff provides outsourced human resource services and back office administrative support, including benefit administration and payroll services for small companies.

Click to enlarge


Chart Courtesy of StockCharts.com

You've got to admit that the chart looks fairly good, with the stock having bottomed in November and having climbed nearly 60% since the bottom, compared to a 7% rise for the S&P 500 over the period.

The company has been executing well, with its most recent earnings showing a year-over-year decline, especially in investment income. Yet, given the tough business climate, they made money, suggesting that there are still customers out there who are using their services. There is no real sign that the market thinks that the company won't do reasonably well in the current quarter.

Click to enlarge

Chart Courtesy of StockCharts.com

Next, we look at Monster Worldwide (NYSE: MWW, Stock Forum). This stock offers a glimpse into how the market is betting on the middle of the employment curve, including technical help and middle management.

This stock did not bottom in November. In fact as Administaff was climbing, Monster was losing ground, falling harder with every employment report released. That's what makes the stock's recent rebound interesting.

In other words, the fact that Monster has rebounded suggests that some on Wall Street are betting that the worst may be over for the employment picture. Of course, that's debatable, especially when the most recent ADP report showed that 742,000 jobs were lost in March.

Other employment figures, such as those released by the Institute for Supply Management (ISM) suggest that maybe the rate of rise in unemployment is slowing, as the employment component of the March ISM report checked in at 28.1, rising two points from February, and declining for the eighth straight month.

One other gauge, the Monster Worldwide Employment Index will be released later in the week. The February reading was not particularly cheerful.

Click to enlarge

Chart Courtesy of StockCharts.com

Finally, we check in with Manpower Inc. (NYSE: MAN, Stock Forum). This is where the market places its bets on the corner office crowd, the big time executives that pilot America's corporations.

And in case you've missed it, this is a bad time to be a company CEO or senior board member, given the negative developments at General Motors, Chrysler, and AIG, just to mention a few key players of the moment.

Manpower shares are in a trading range, although the most recent bottom of the range came in March, and the stock is up nearly 38%, making it a decent swing trade.

Yet, its chart pattern is not particularly alluring, especially when compared to Administaff, which suggests that investors are more willing to take their chances with the human resources administrator than with a pure play on executive employment.

More important is the fact that the company's March employment survey ran the following headline: "Survey Points to Weakest Employment Outlook Since the 1982 Recession."

Conclusion

So our bellwethers are giving us a mixed picture with Administaff continuing to act better than the other two.

That's clearly a distinction that is related to the fact that Administaff provides services to ongoing concerns, or companies that are still doing business. They may also be benefiting from the fact that small businesses may be finding it cheaper to outsource key functions such as human resources to companies like Administaff.

Manpower and Monster are pure plays on employment, a sector that is clearly still in decline, if you believe the overall chart patterns in these two stocks.

So what's in store? If we believe our stock trio, we'll get another nasty employment number on Friday. More important, aside from a human standpoint, will be how the market answers. This rally is getting long in the tooth by bear market standards.



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