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While Friday’s September employment report left many investors scratching their heads, including me, the stock market initially greeted the data welcomingly as the S&P 500 rose quickly in early trading. As the date wore on, however, the S&P 500 started to resemble a leaky balloon as it sputtered around, falling throughout afternoon trading and eventually closing the day in the red.

What happened?

Investors, economists and analysts dug deeper into the Bureau of Labor Statistics’ September job findings and they did not like what they saw. While the report’s headline claimed the unemployment rate fell to 7.8% in September vs. 8.1% in August, more careful analysis showed the vast majority of jobs responsible for that decline were part-time ones. In my view, this situation points out one of the many issues associated with the Household Survey that is responsible for the unemployment rate calculation. As we all know, part-time work could be for a few hours a week up to 25 hours or so per week and that it does not equate to a full-time job.

Rather, the growth in part-time employment points to how difficult the economy is right now. Given several uncertainties — rising input costs, the presidential election, the fiscal cliff and the need to raise the country’s debt ceiling yet again — companies are hesitant to spend, let alone hire. That’s confirmed in the September Employment Report as it showed that non-farm job creation was weaker in September than in August, which was weaker than in July. At the same time, Challenger Gray’s September Job Cuts Report shows that employers have announced 386,001 planned job cuts in 2012, marking one of the highest total job cuts in the first nine months of the year since 1997.

Considering the trend of rising prices paid by purchasing managers, odds are that consumers will see higher prices in the coming months. Couple that with a shrinking labor force — down 211,000 in September and more than 2.6 million over the last 12 months — continued high unemployment and underemployment, and the prospects for the consumer in the coming months are questionable. To me, this situation means that the cash-strapped consumer associated with my Rise and Fall of the Middle Class PowerTrend is alive and well, and he or she will continue to buy what is needed rather than what is wanted in the coming weeks and months.

No wonder the National Retail Federation, the nation’s largest retail trade group, announced Tuesday that it expects sales during the winter holiday shopping period in November and December to rise 4.1% this year. While that sounds good, this forecast calls for the slowest holiday sales rise in the last few years. According to the NRF, holiday sales rose 5.5% in 2010 and 5.5% in 2011.

As we edge closer to the year-end holiday season, part-time, seasonal jobs will continue to grow as retailers add staff. It’s important to remember, however, that those additions are only temporary and offer little job security to those who take them.

Shifting gears, security of another type was all over the market this past week — cyber security. Subscribers to my PowerTrend Profits newsletter learned that cyber security, as well as more traditional security offerings, make up the cornerstone of my Safety & Security PowerTrend. This past week, identify-theft protection company Lifelock (LOCK) went public. While the shares fell more than 13% last week, which makes for painful initial public offering (IPO) performance and is far different than the successful IPO enjoyed by network security company Palo Alto Networks (PAWN). Despite the initial stock performance, the fact that more than 11.6 million U.S. adults have been the victim of identity theft makes Lifelock a company to keep our eyes on.

Sincerely,

chris

Chris Versace
Editor, PowerTrend Brief

The Week Ahead

The big news this week is the start of 3Q 2012 corporate earnings season, which gets started on Tuesday when Alcoa (AA) shares its quarterly review and outlook. We’ll also hear from Yum! Brands (YUM), as well as Costco (COST) and JPMorgan Chase (JPM). Aside from earnings and economic data, we’ll also hear from FedEx (FDX) and Wal-Mart (WMT) as both of those companies are having analyst days on Tuesday and Wednesday. Aside from any potential company-specific guidance revisions, investors should be listening for any changes shared by either company about domestic and global growth expectations.

In terms of economic data on tap this week, there are several to be had but the one that most investors will be focusing on will be Friday’s Producer Price Index (PPI). Last week’s Institute for Supply Management’s manufacturing and non-manufacturing indices for September both showed a steep month-over-month increase in their respective prices paid component, a trend that began in June. Despite a modest increase during the last few weeks, gas prices remain up nearly 10%, compared to year-ago levels. Factor in the lag in food prices, given this summer’s drought, and it’s not looking good on the inflation front.

Lastly, we’ll see Rep. Paul Ryan and Vice President Joe Biden debate Thursday night as their parties’ vice presidential nominees. If the debate is anything like last week’s between Gov. Mitt Romney and President Obama, it should clarify the issues and serve the Romney-Ryan ticket well.

Here’s a more detailed look at what data we’ll be getting this week:

Monday, Oct. 8
Columbus Day – Stock markets open; Federal Holiday

Tuesday, Oct. 9
Alcoa Inc. (AA)

Wednesday, Oct. 10
MBA Mortgage Index (Weekly)
Wholesale Inventories (August)
Treasury Budget (September)
Fed’s Beige Book (September)
Costco Wholesale Corp. (COST)
Helen of Troy Ltd. (HELE)
Host Hotels & Resorts (HST)
Ruby Tuesday, Inc. (RT)
Yum! Brands (YUM)

Thursday, Oct. 11
Initial & Continuing Jobless Claims (Weekly)
Import & Export Prices (September)
Fastenal Co. (FAST)
Safeway Inc. (SWY)

Friday, Oct. 12
University of Michigan Consumer Sentiment Index (October)
Producer Price Indices (September)
JPMorgan Chase & Co. (JPM)
Wells Fargo & Co. (WFC)